When you report your organization’s electricity emissions, you may encounter two different accounting methods: market-based and location-based emissions. Although both methods aim to quantify emissions from electricity use, they do so in distinct ways, offering different insights into your organization’s environmental impact.
This article clarifies the difference between these two methods and explains how each one affects your reporting.
Location-Based Emissions
The location-based method calculates emissions based on the average emissions intensity of the electricity grid that serves your location. It accounts for the mix of energy sources, including renewable and non-renewable, within the grid. In essence, this method reflects the average emissions generated by your grid's electricity, considering the overall energy mix of your area.
Grid Energy Mix: When using the location-based approach, your emissions are calculated using the average emissions factors of the grid, which include the proportion of renewable energy integrated into it.
Purpose: This approach provides a standard measure of emissions for organizations located within the same grid area, allowing for uniform comparisons regardless of individual energy purchase decisions.
Market-Based Emissions
The market-based method, on the other hand, calculates emissions based on the specific energy purchases your organization makes. This method accounts for any renewable energy certificates (RECs) or guarantees of origin (GOs) that you have purchased to support renewable electricity generation.
Certified Renewables: You need to disclose the amount of certified renewable grid electricity you purchase in kWh. This could include direct contracts with renewable electricity suppliers or the purchase of RECs that represent a specific number of megawatt-hours (MWh) of renewable electricity. KEY ESG will then calculate the emissions associated with the remaining portion of non-renewable purchased electricity.
Purpose: This method allows companies to showcase their efforts to support renewable electricity and reduce their carbon footprint by investing in certified green electricity sources.
How to Use Market-Based and Location-Based Methods
Location-Based Approach:
Data Needed: You will need to know the total quantity of kWh purchased grid electricity from your electricity providers.
Example: If your organization consumes 10,000 kWh of electricity from a grid, KEY ESG will calculate the associated emissions using the a average grid mix emission factor.
Market-Based Approach:
Data Needed: You’ll need records of your renewable electricity purchases which may include information about your renewable electricity contracts or the RECs or GOs you have purchased, to support the renewable electricity statement. This will always have to be less than or equal to the total amount of kWh purchased.
Example: If you purchase 10,000 kWh of grid electricity, and 7,000 kWh of that is from certified renewable sources (which will have zero emissions), your market-based emissions will be calculated based on the 3,000 residual kWh of non-renewable electricity you have purchased - KEY ESG will calculate the GHG emissions from this 3,000 kWh using a residual mix emission factor.
Why Both Methods Matter
Using both market-based and location-based approaches provides a comprehensive view of your organization's emissions profile. The location-based method gives a baseline understanding based on geographical grid emissions, while the market-based method highlights your active role in supporting renewable energy and reducing emissions.
By understanding and applying these two methodologies, you can accurately report your electricity emissions and demonstrate your organization's commitment to sustainability and environmental responsibility.