The most environmentally friendly way to dispose of an electric blanket is not to truly dispose of it at all. By that I mean to see that it ends up somewhere other than a landfill. You could cut off the cord where it emerges from the blanket, thus turning it into a regular if not exactly soft and cuddly blanket. You could then try to take it to a homeless shelter or charitable center and donate it as a regular blanket for use against the cold. If this doesn't work or it is not accepted, you should dispose of it at a recycling center in your area that accepts electronic goods for salvage. You should not dispose of it in household trash.