What type of fencing is environmentally better...wood or vinyl?

It's a close call. Wood uses trees and creates CO2 as it decays. Vinyl takes oil and energy to make (creates CO2) and has to be disposed of in a landfill.

So I'd say use whichever you like better. And consider the suggestion above to use composite or "manufactured wood". That is a recycled product that is longer lived than either vinyl or wood, so you get more use out of the resources involved. Here's some info:

http://www.toolbase.org/Technology-Inventory/Decks...

Something to consider: wood will break down and need to be replaced but vinyl *won't* break down and will just create landfill. Have you considered the composite boards made by recycling wood (I think sawdust) and plastic? It never needs painting and resists decomposition.

http://www.toolbase.org/Technology-Inventory/Decks...

Now you know both has been treated orchemicalized. Wood though is much more friendly.