Unifying Product Costing and Product Carbon Emissions Methods

Costing of postal products is well established in the United States, with a very long history, codified in the Postal Accountability and Enhancement Act of 2006 (PAEA), and in accord with economic theory. Under theory and practice, costs are attributed to products based upon causality: all costs and only costs that are caused by products are attributed to them. In contrast, product greenhouse gas (GHG) accounting is in its infancy. Firms are increasingly reporting their GHG emissions inventories, comprised of Scope 1 emissions (generally those they cause through combustion activities necessary in their production processes), Scope 2 emissions (those embedded in their purchased electricity), and Scope 3 emissions (those embedded in emissions from their suppliers.) As more firms report GHG emissions, there is growing recognition that the emissions a postal operator incurs on behalf of its customers should be included in that customer’s Scope 3 emissions. But standards for allocating emissions to product are new and developing and generally do not embody causality. This chapter develops a basic framework unifying product cost and product GHG accounting in a framework based upon causality. It shows that cost and GHG emissions are different manifestations of the same resources (capital, labor, and consumables) used to produce products and services, and that the same basic economics describing returns to scale and scope that apply to product costing must also apply to product GHG accounting. We demonstrate this with respect to product and GHG accounting both general and at the United States Postal Service, which offers GHG accounting as a free service to its customers.