The answer to your question would be that the sentence that uses transitions most effectly is the following one: Reducing paper usage benefits the school; for example, money previously budgeted for paper could be spent on creative instructional materials. That is, the correct option would be A.
Reducing paper usage could benefit the school in many ways. One of the ways is that the money previously spent on paper can be used for somethig else. As “money previously budgeted for paper could (…)” illustrates one of the ideas in which said amount of money could be spent on, “for example” is the transition word needed in this sentence.