Cozero’s electricity accounting methodologies will change to better support accurate and standards-aligned carbon accounting for our clients. This article explains the changes and how to use them effectively.

Scope 2 reporting is heavily based on a dual accounting and reporting approach defined by the Greenhouse Gas Protocol. This approach requires companies to report two sets of Scope 2 emissions: market-based and location-based emissions. This approach is required by many reporting standards, such as CDP and CSRD, and is considered the best practice for Scope 2 reporting.

The dual-reporting approach provides comparability and context for companies’ emissions, and is particularly relevant to electricity emissions. Due to the nature of electricity grids, companies using grid electricity don’t directly use the renewable electricity they buy. Instead, they use a mix of electricity from various sources that is available on the grid. Market-based contracts ensure that companies can buy a specific amount of renewable electricity that gets added to the grid, which allows them to claim the benefits of reduced emissions in their Scope 2.

The benefits of the dual-reporting are:

The market-based method reflects whether companies intentionally choose to procure low-carbon electricity or not. These emissions can be calculated by using contractual agreements companies have with their electricity providers. These can be direct purchase agreements of renewable energy, renewable energy certificates, or supplier-specific electricity products.

The location-based method reflects the emissions the company is directly releasing into the air as a result of the use of the regional or national electricity grid. They are calculated based on the average emissions intensity of the grid on which energy consumption occurs.

In summary, location-based accounting gives a realistic picture of the grid's current state, while market-based accounting drives climate improvements and recognizes a company's efforts to support renewable energy generation.

These updates align with the latest carbon accounting standards to enhance the accuracy and transparency of your emissions data and enable tracking of electricity consumption by source. They also support compliance with reporting frameworks like CDP and the upcoming CSRD. This decision is also based on frequent requests and feedback on our clients. By adopting dual-reporting and refining our categorization of market-based mechanisms, we aim to better support your carbon management goals.

To reflect the dual-reporting, and to answer the growing challenges of emissions and energy reporting requirements, we have made changes to the way we account for your electricity emissions. Previously, companies would account for their emissions by choosing either a location- or market-based emissions as their calculation method. To make dual-accounting faster and easier, our new methodology only requires you to input all the data using the market-based method. Based on the electricity consumption tracked, Cozero will automatically connect your electricity consumption to the correct country or regional grid emissions intensity and calculate the location-based emissions. As a result, you obtain two sets of emissions for the same consumption, which you can use to report your electricity emissions.

The Category where electricity emissions are tracked has been renamed from “Purchased electricity” to “Electricity”. We have made the category naming more inclusive for all acquired electricity for intuitive tracking.

To reflect the most common market-based methods accepted by the Greenhouse Gas Protocol, also called contractual instruments, we have added several new calculation methods in the new subcategory that reflect different ways of sourcing renewable electricity - or the lack of it. Each method has been built to allow breakdown of energy sourcing to support energy reporting.

The new calculation methods for market-based emissions are shown below, in order of preference for highest level of precision. Companies should follow this order and use the best available method to account for their emissions.

Cover direct power purchase agreements (PPAs) for low or zero carbon electricity sources, including renewables and nuclear energy. These sources generate zero Scope 2 emissions due to their emission-free nature. Upstream impacts for each electricity source are calculated using source-specific emission factors as modeled impacts in Scope 3. Transmission and distribution losses are calculated as modeled impacts based on upstream emission factors and country average loss rates.

This method can be used when a company is consuming grid electricity without a specific purchase contract, but purchases renewable energy certificates to compensate for their emissions. This method results in zero Scope 2 emissions. However, as the company is consuming grid electricity, the upstream impacts are calculated in Scope 3 as modeled impacts based on the average emissions intensity of the national grid.

Involves emissions accounting when a company's energy supplier can provide a specific emission factor for the sourced electricity. This might not always represent renewable energy and can sometimes exceed the average grid emission factor. However, if methods 1 or 2 are not possible, companies must use this factor for market-based emissions. Scope 2 emissions are determined by the supplier-specific factor, while upstream impacts for Scope 3 are calculated as modeled impacts based on the national grid's average emissions intensity. However, if a supplier-specific upstream emission factor is available, companies can change this and use it instead

The final market-based approach is used to track electricity consumption not covered by the previous three methods. Assuming no specific purchasing decisions, emissions are calculated based on the residual mix emission factor of the local or national grid. This factor does not account for renewable electricity in the grid already claimed by other parties, preventing double counting. Residual mix factors are not widely available, and mostly used for European countries. In the absence of such a factor, calculations revert to the location-based method using the country's average grid emission factor. Although this calculation is not using a market-based method, these emissions form a part of the total market-based emissions.That is why this option is recommended lastly and should only be used if no other method is available to you.

We are excited to transition to using data from the International Energy Agency (IEA) for our location-based and upstream electricity emissions accounting. IEA emission factors provide the most up-to-date, country-specific information available, enhancing data accuracy. This allows you to make better-informed decisions about energy procurement and efficiency, leading to more precise management of your carbon footprint.

The IEA offers two global emission factor datasets: one for electricity generation and one for upstream impacts. These datasets provide comprehensive global coverage and are used for both direct electricity emissions from generation (Scope 2) and supply chain emissions (Scope 3.3). This ensures your emissions are calculated using the most accurate data specific to your location’s energy profile.

Upstream emission factors (Scope 3.3) account for emissions from the entire supply chain of electricity production, including extracting, processing, and transporting fuels used in electricity generation. In Cozero, these factors are automatically used to calculate upstream impacts based on your electricity consumption, ensuring consistent and comprehensive accounting without the need for multiple data inputs.

In addition to IEA data, we are updating our residual mix calculations with the new emission factors for 2023 recently published by the Association of Issuing Bodies (AIB). AIB provides residual mix factors for most European countries.

Previously, you have been able to account for electricity emissions by inputting only direct emissions data, for example if you received this directly from your electricity providers. This is an efficient way to track emissions, but is not always the most traceable way. As reporting of energy consumption is becoming increasingly relevant for reporting standards such as the CSRD, we are adding an additional data input to our direct CO2e accounting methodology, which allows you to also track the consumed electricity. This change not only makes your data easily traceable, but also helps you report electricity consumption data with more ease.

In addition to purchasing electricity, more and more companies are producing renewable electricity on-site through solar panels or wind turbines. This electricity generation does not cause direct emissions, but it forms an integral part of companies’ energy consumption. Often companies also don’t consume all the renewable electricity they generate, and send it back to the grid. This cannot be claimed as a benefit for carbon accounting purposes beyond the reduced use of grid electricity. However, renewable electricity generation is an important sustainability effort companies should report to their stakeholders or through reporting frameworks. Now this total generation, which should include both the electricity consumed and sent back to the grid, can be tracked in the subcategory “Renewable electricity generation” by using the activity “Gross renewable electricity generation”. The share of the generated electricity that the company consumes itself should then be reported separately in the subcategory “Electricity consumption”, together with all electricity purchased by the company, by using the activity “Self-generated renewable electricity consumption”.

In addition to electricity in Scope 2, these new methodologies are also reflected in those Scope 3 categories where electricity consumption is relevant. All electricity-related inputs in Scope 3 will now be calculated using the activity “Country residual or grid mix”. This means that emissions are calculated using the selected county’s residual mix emission factor when available, and otherwise with the average emissions intensity of the local grid. This reflects the average consumer situation in a specific county. However, if you have data available from your value chain partners, you can always adjust the default emission factors to suit your supplier or customer information.

Our updated methodology only applies to electricity consumption. The other Scope 2 emissions sources (purchased heat, steam, and cooling), will continue to follow the old methodology. This is due to a lower relevance of market-based instruments and limited global data sources.

In addition to these changes, we have added a new Category relevant for companies buying and selling energy: Purchased electricity - sold to consumers. You can use this category to account for electricity you purchase and sell to other companies.