What is the difference between market-based and location-based Scope 2 emissions?

Scope 2 emissions are indirect greenhouse gas emissions from generated purchased electricity, steam, heating, and cooling that an organization consumes. There are two primary methods to measure these emissions: location-based and market-based. Here’s how they differ:

Location-Based Emissions

This method calculates emissions based on the average fuel mix of the electricity grid serving the area where the organisation operates.

How It Works:

• Data Collection: Collect data on the amount of electricity consumed at the organisation’s facilities.
• Grid Characteristics: Identify the fuel mix of the local electricity grid, which includes the proportions of various energy sources (e.g., coal, natural gas, renewables) used in the grid.
• Calculation: Apply the average carbon intensity of the local grid to the electricity consumption data to estimate emissions.

This approach provides a general measure of the emissions associated with the electricity supply in a specific region, reflecting the broader environmental impact of the grid.

Example: If a company’s electricity is supplied by a grid that relies heavily on coal, its location-based emissions will reflect the higher carbon intensity associated with coal power, regardless of the company’s specific energy purchasing decisions.

Market-Based Emissions

This method calculates emissions based on the specific electricity purchases made by the organisation, considering the energy mix of the suppliers and any renewable energy certificates or green power agreements.

How It Works:

• Data Collection: Obtain detailed bills or reports from energy suppliers that include information on the fuel mix and emission factors of the purchased electricity.
• Consumption Data: Record the total amount of electricity consumed.
• Fuel Mix Analysis: Review the information on the energy mix provided by the suppliers.
• Calculation: Use this data to calculate emissions based on the actual energy sources purchased by the organisation.

This approach reflects the emissions associated with the specific electricity that an organisation has actively chosen to buy, offering a more tailored view based on procurement decisions.

Example: If a company buys electricity from a supplier that uses 100% renewable energy sources, its market-based emissions will be significantly lower than if it purchased from a supplier with a high proportion of fossil fuels.

In summary, the location-based method provides a standardised measure of emissions based on the regional grid’s average fuel mix, while the market-based method offers a more customised view that reflects the organisation’s specific energy procurement choices and agreements. Both methods are important for understanding and managing the environmental impact of electricity usage.