Scope 2 represents one of the largest sources of GHG emissions globally. There are significant opportunities for organizations to reduce these emissions by reducing electricity demand and/or shift to low-carbon sources.
There are two methods to calculate scope 2 emissions: location-based method and market-based method. For more information see the Wiki on Purchased electricity.
Market-based Approach
As a reminder, the market-based method reflects emissions from electricity that companies have purposely chosen, or their lack of choice. This method should be used for locations where the following type of contracts or instruments are available:
Energy Attribute Certificates (RECs, GOs, I-REC, etc.);
Power Purchase Agreements (PPAs) with energy generators (for both low-carbon, renewable, or fossil fuel-based energy);
Green electricity products from energy suppliers.
If a company does not have any such contracts or if contracts do not meet the required quality criteria (see below for more info) then it should use the residual-mix: regional emission factors representing the emissions that remain after certificates, contracts, and supplier-specific factors have been claimed and removed from the calculation. This approach avoids double counting of the emissions from contractual instruments. These factors are widely available for European countries and should always be used in market-based accounting, before diverting to the location-based grid mix.
If the residual mix is not available, then the location-based method shall be used (in this case, the reported Scope 2 market-based emissions will be the same as the location-based emissions).
Market-based method accounting hierarchy
When choosing the emission factors, companies need to use the most accurate emission factor available.
As described above, here is a hierarchy of calculation approaches which can be used in your market-based accounting. For more information, see the GHG Protocol Scope 2 Guidance (Chapter 6 and 10).
Emission factors | Example |
Energy attribute certificates (e.g. unbundled, bundled with electricity, conveyed in a contract for electricity, or delivered by a utility) |
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Contracts for electricity, such as power purchase agreements (PPAs) and contracts from specified sources, where electricity attribute certificates do not exist or are not required for a usage claim |
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Supplier/Utility emission rates, such as standard product offer or a different product (e.g. a renewable energy product or tariff), and that are disclosed (preferably publicly) according to best available information |
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Residual mix that uses energy production data and factor out voluntary purchases |
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Other grid-average emission factors |
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Scope 2 Quality Criteria
To make the market-based method globally consistent and able to give accurate results, your contractual instruments must meet these criteria.
The presence of contractual information in any market where a company has operations triggers the requirement to report according to the market-based method. If the contractual instruments do not meet the criteria then other data can be used as an alternative (eg. residual or grid mix data).
If no facilities in the entire organizational boundary of the reporting entity are located in markets with contractual claims systems, or where no instruments within those systems meet scope 2 Quality Criteria required by this document, then only the location-based method shall be used to calculate scope 2.
All contractual instruments used in the market-based method for Scope 2 accounting shall: |
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In addition, utility-specific emission factors shall: |
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In addition, companies purchasing electricity directly from generators or consuming on-site generation shall: |
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Finally, to use any contractual instrument in the market-based method requires that: |
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FAQ
How do energy attribute certificates work?
Energy Attributes Certificates (EAC) are issued as proof of electricity produced by renewable sources. Each EAC endorses that 1MWh was generated and injected to the grid by a specific renewable source, such as wind or solar plant. A certificate is often bought, sold and canceled with prices determined by a supply and demand market. When an eligible energy producer generates electricity, it receives certificates for the corresponding volume produced that can be kept by the producer, released on the market or transferred to third parties such as final consumers. They can be sold as bundled with the electricity or unbundled, which means sold separately. These certificates have become a sort of currency in the renewable energy market, helping buyers to credibly claim their sustainable energy choice and reduce their environmental impact.
How to apply the market-based method in the case of a multi-regional company?
If a multi-regional company has any operations within the corporate inventory where the market-based method applies, then a market-based method total shall be calculated for the entire corporate inventory to ensure completeness and consistency. For any individual operations in the corporate inventory where market-based method data is not applicable or available, data from the location-based method should
be used to represent the emissions from the facility. For these operations, the calculated scope 2 according to the market-based method will be identical to the location-based.
How to apply the market-based method in the case of consumption from owned/operated facilities or direct-line transfers?
In that case, because they do not own a certificate (certificates are sold off), companies should calculate their emissions using other market-based method emission factors such as “replacement” certificates, a supplier-specific emission rate, or residual mix (for the market-based method total) and the grid average emission factor (for the location-based total).
How to match emission factors with units of electricity consumption?
Each unit of electricity consumption should be matched with an appropriate emission factor. For the market-based method, this means choosing a contractual instrument or information source for each unit of electricity. For instance, if a company has purchased certificates to apply to half of a given operation’s electricity use, it will need to use other instruments to calculate the emissions for the remaining half.
Companies centrally purchasing energy attribute certificates for all the operations in a single country or region should indicate how they match these purchases to individual site consumption.
Companies may also use certificates conveyed to them by their supplier, separately from the other supplier mix information. This ensures equivalent treatment of certificates regardless of how they are sourced.
For example, a utility delivers 1,000 MWh in total to customers and 200 MWh of that (20%) comes from zero-emitting renewables for which the energy attribute certificates have been retired. Any customer of that utility would be able to claim that 20 percent of their electricity is renewable and substantiated with certificates. If Customer A of this utility consumes 2.5 MWh (of the total 1,000 MWh), they can claim 0.5 MWh of renewable energy (of the 200 MWh total) without double counting, but cannot claim any more than this. To cover all of their electricity consumption with zero-emission certificates, Customer A would only need to purchase 2 MWh of renewables on their own.
For additional information on the calculation of emissions, users can refer to the GHG Protocol, Scope 2 Guidance.