Location-based Scope 2 uses average grid emission factors for the geographic region, while market-based reflects specific electricity purchases including renewable energy contracts, RECs, and supplier-specific emission rates per GHG Protocol guidelines.
Dual Reporting Requirement
GHG Protocol Scope 2 Guidance
- Both methods required for complete reporting
- Location-based shows grid dependency
- Market-based demonstrates procurement choices
- Quality criteria for contractual instruments
- Hierarchy of emission factors for each method
Location-Based Method
Calculation Approach
Electricity Consumed (MWh) × Grid Average EF (tCO2e/MWh) = Emissions
Data Sources
- Government databases - EPA eGRID, IEA factors
- Regional grid operators - ISO/RTO publications
- National inventories - Country-specific factors
- Residual mix where available
- Sub-national factors for accuracy
Use Cases
- Baseline establishment for reduction targets
- Geographic comparison across facilities
- Grid decarbonization tracking over time
- Regulatory compliance where mandated
Market-Based Method
Contractual Instruments Hierarchy
- Energy attribute certificates (RECs, GOs, I-RECs)
- Direct contracts (PPAs, green tariffs)
- Supplier-specific rates with disclosure
- Residual mix (grid minus claimed renewables)
- Location-based (if no other data available)
Quality Criteria for Instruments
- Vintage alignment - Same reporting year
- Geographic market - Reasonably local
- Exclusive claim - No double counting
- Tracked and retired - Registry verification
- Third-party certified - Green-e or equivalent
Implementation Considerations
Data Collection Requirements
Location-Based:
- Facility addresses and grid regions
- Monthly electricity consumption
- Heat/steam purchases if applicable
- Updated emission factors annually
Market-Based:
- Renewable energy contracts
- Certificate retirement reports
- Supplier emission disclosures
- Residual mix factors
- Tracking system records
Common Challenges
Double Counting Prevention
- Unique certificate retirement required
- Registry tracking for verification
- Supplier attestation for green tariffs
- Boundary documentation for shared facilities
Geographic Matching
Best Practice Hierarchy:
1. Same grid → Optimal
2. Adjacent grid → Acceptable
3. Same country → Permitted
4. Same continent → Questioned
Reporting Best Practices
Disclosure Requirements
- Dual reporting table showing both methods
- Methodology description for each approach
- Emission factor sources and vintages
- Certificate details for market-based claims
- Residual mix availability notation
Performance Metrics
- Grid emission intensity trends
- Renewable percentage of consumption
- Certificate coverage ratio
- Reduction achievement by method
- Target progress tracking
Strategic Implications
Investment Decisions
- Location-based guides facility siting
- Market-based drives procurement strategy
- Combined view informs holistic approach
- Cost-benefit analysis of renewable options
Stakeholder Communication
- Investors - Preference for market-based progress
- NGOs - Focus on additionality claims
- Customers - Product carbon intensity
- Regulators - Compliance with local rules
Understanding both Scope 2 methods enables organizations to demonstrate both their dependence on grid infrastructure and their active choices to procure cleaner energy, providing complete transparency for emissions tracking and reduction strategies.