Coatings perform a positive environmental function in protecting and decorating surfaces. They are used to preserve timber and enable us to use less precious hardwoods and replace them with renewable-forest soft woods, which would otherwise be unsuitable for construction purposes. Coatings also save valuable metals like steel and aluminium, and the fuel needed to make them, by preventing corrosion. See the video clip below to see where we'd be without paints and coatings!
However, the two biggest environmental effects associated with coatings are the emission of VOCs (see "What are VOCs?") during application and the disposal of surplus materials (see "How do I dispose of left over paint/varnish?"). No decorative coating is entirely environmentally friendly and some high gloss paints, aerosols and some other specialist paints in particular need higher VOC levels for performance and, at present, there is no low VOC substitute for these.
For further information see the BCF leaflet "Decorative Coatings and the Environment – a Consumer Guide".