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This paper studies the relationship between USO and environmental concern in the postal sector. We concentrate on the obligation to deliver mail on a D+1 basis. We examine how the USO should be designed to properly account for the environmental cost in a variety of situations ranging from a first-best setting to a (Ramsey-type) second-best world with differentiated or uniform prices. We show that, it may be desirable to scale down the D+1 obligation and to restrict it to specific geographic areas. We also study how postal products should be priced to account for their environmental impact.

Environmental Cost and Universal Service Obligations in the Postal Sector