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Scope 2 emissions: Location-based vs. Market-based

When reporting Scope 2 emissions (indirect emissions from purchased electricity, heat, or steam), companies are required to follow two accounting methods: location-based and market-based. 

Location-based Scope 2 accounting reflects the average emissions intensity of the electricity grid where your operations are located.

Instead of looking at your energy contracts, this method uses regional grid averages to calculate your electricity-related emissions.

What this means:

  • If your office or factory is in a country with a coal-heavy grid, your reported emissions will be higher.
  • If you’re in a region powered mostly by renewables or hydropower, your reported emissions will be lower.

 

Market-based Scope 2 accounting reflects the choices your organization makes about where your electricity comes from. 

Instead of just taking the average emissions of the grid (location-based), this method lets you report emissions based on contracts or certificates you hold with energy providers (for example, renewable energy certificates or green power contracts).
 
What this means:
  • If you purchase renewable energy through your supplier, the lower emission factor from that contract can be used in your reporting.
  • If no such contract or certificate exists, you’ll use the “residual mix” (the grid-average emissions not already claimed by others).
 
 
This method gives organizations a way to reflect their purchasing decisions in emissions reporting and, over time, send market signals that encourage investment in cleaner energy.

More information in Chapter 4: Scope 2 Accounting Methods (GHG protocol)
 


In the Klappir Platform

Market-based Scope 2 emissions need to be calculated out of the platform and is a manual import field Klappir users fill in in Accounting as a yearly values right before generating their Statement.