I live in a hippie college town that provides numerous earth/animal-friendly ideas to draw from. Not all related to knitting (obviously
) but many can be used with knitting in mind.
Thrift stores have yarn, needles, patterns, & sweaters to unravel. Many new knitting books recycle old ideas, so why not just buy older, used books? Wild Knitting by Angela Jeffs has patterns for knit vegetables, underwear, house things, etc. which are similar to things I've seen in recent books. Even books from the 1940s & 50s contain bikini patterns & cute outfits. Pattern magazines from the 1960s & 70s are full of interesting pictures & projects.
Many libraries have a nice selection of knitting books. Why buy when you can rent for free? It's also a great way to test out books before you buy them. New books & magazines can be purchased from local yarn shops, instead of Barnes & Noble.
The knitalongs section here has a "Use what you have" thread. Keeps consumption down & encourages creativity! It's a cool idea.
Knitted gifts do keep others from purchasing mass-produced items. Handmade items generally last longer, as well. People tend to take better care of personalized gifts (at least in my experience). Therefore, less trash.
I'm planning to knit cute lunchbags for family members who currently use paper bags & don't recycle. I'm also considering making water bottle holders & purchasing nice plastic bottles to avoid wasted cheaper bottles that are only used once or twice before being tossed. I'm spoiled by my city's free recycling program, and sometimes forget that not everyone has that option.
Old t-shirts & plastic shopping bags make excellent yarn.
Now that it's warming up, knitting can be done outside or by an open window. More natural light=less electricity.
Online yarn sources such as handpaintedyarn.com sell products created by cooperatives. Peace Fleece is another good source of yarn. The Hunger Site (the "click a day" button site) sometimes sells yarn in its online shop.
It sometimes takes thought & planning, but it's possible to (cheaply) knit with minimal harm to the environment.
(edited, because I somehow managed to underline everything)