Location-based vs. market-based emissions in carbon accounting

Two methods, one reporting requirement, and the role of EACs

Scope 2 emissions, the indirect GHG emissions from purchased electricity, steam, heating, and cooling, are one of the most actionable categories for corporate decarbonisation. The GHG Protocol, the world's most widely used greenhouse gas accounting standard, requires companies to report their scope 2 emissions using two distinct methods, known as dual reporting.

The location-based carbon accounting method

The location-based method calculates scope 2 emissions based on the average emission intensity of the electricity grid where your facilities operate. It uses grid-average emission factors for defined geographic locations whether local, subnational, or national.

Key characteristics:

• Reflects the physical reality of the grid serving your operations
• Uses publicly available grid-average emission factors (e.g., From the IEA or national energy agencies)
• Cannot be reduced by purchasing renewable energy certificates; it always reflects the average grid mix
• Provides a consistent baseline for comparing emissions across organisations in the same region

Example: A company consuming 1,000 MWh of electricity in Germany, where the national grid emission factor is 0.4 kg CO₂e/kWh, reports 400 tonnes CO₂e under the location-based method, regardless of any renewable electricity certificates purchased.

The market-based carbon accounting method

The market-based method calculates scope 2 emissions based on the electricity you have chosen to purchase, or your lack of a specific choice. It uses emission factors derived from contractual instruments that convey information about the energy source.

Key characteristics:

• Reflects your company's active energy procurement decisions
• Uses emission factors from contractual instruments such as energy attribute certificates (EACs), power purchase agreements (PPAs), or supplier-specific emission rates
• Can result in zero scope 2 emissions if 100% renewable electricity is procured through valid instruments
• Falls back to the residual mix (the grid emissions remaining after all tracked renewable claims are removed) if no specific instruments are held

Example: A company consuming 1,000 MWh and retiring 1,000 guarantees of origin (GOs) from a certified wind farm reports 0 tonnes CO₂e under the market-based method.

Location-based vs. market-based scope 2 emissions: Key differences

The GHG Protocol mandates dual reporting because each method tells a different story:

Together, the two methods provide a complete picture: the location-based method shows your exposure to grid carbon intensity, while the market-based method reflects the impact of your procurement strategy.

The role of energy attribute certificates (EACs) in scope 2 accounting

EACs are the primary instrument companies use to reduce their market-based scope 2 emissions. An EAC is a tradable certificate that represents the environmental attributes of 1 megawatt-hour (MWh) of renewable electricity generation.

Types of EACs by region

How EACs work in scope 2 accounting

1. A renewable energy generator produces 1 MWh of renewable electricity
2. An EAC is issued representing the environmental attributes of that generation
3. Your company purchases and retires the EAC, claiming the renewable attributes
4. The retired EAC is used as the emission factor (0 kg CO₂e/MWh) in your market-based scope 2 calculation

Important: EACs only affect your market-based scope 2 total. Your location-based emissions remain unchanged regardless of certificate purchases.

The emission factor hierarchy for scope 2 reporting

When calculating market-based scope 2 emissions, the GHG Protocol provides a hierarchy of data sources:

1. Energy Attribute Certificates, unit-specific (most precise)
2. Direct contracts, PPAs with generators
3. Supplier-specific emission rates (utility/supplier mix)
4. Residual mix
5. Grid-average emission factors (fallback, least precise)

For the location-based method, the hierarchy prioritises:

1. Sub-national/regional grid emission factors
2. National grid-average emission factors
3. Multi-country regional averages (where national data is unavailable or less representative)

How to report scope 2 emissions: 4 practical steps  

1. Collect your activity data

Gather electricity consumption data (in kWh or MWh) from utility bills for all facilities within your organisational boundary.

2. Identify your contractual instruments

Document all EACs, green tariffs, PPAs, or supplier-specific emission data you hold. Ensure certificates meet the GHG Protocol's scope 2 quality criteria, like vintage requirement, geographic boundary, etc.

3. Calculate both methods

Location-based: consumption × grid-average emission factor for your region

Market-based: consumption × emission factor from your contractual instruments (or residual mix for uncovered consumption)

4. Report transparently

Disclose both totals clearly labelled. Indicate which method you use for target-setting and performance tracking.

Key takeaways: Location-based vs. market-based scope 2 emissions

• Scope 2 dual reporting (location-based and market-based) is mandatory under the GHG Protocol for companies in all markets.
• Energy Attribute Certificates are the primary tool for reducing market-based scope 2 emissions.
• The location-based method reflects grid reality; the market-based method reflects procurement choices.
• Both methods serve different purposes; use them together for a complete picture of your electricity-related emissions and decarbonisation progress.

How ClimatePartner helps companies procuring EACs

Navigating scope 2 accounting doesn't have to be complex. ClimatePartner supports companies across every stage of their scope 2 journey:

Calculate your scope 2 emissions

Our carbon accounting platform handles dual reporting automatically, applying the correct location-based and market-based emission factors for your operations worldwide. We maintain an up-to-date Emission Factor Database covering grid-average, residual mix, and supplier-specific data.

Source and retire EACs

Whether you need Guarantees of Origin in Europe, RECs in North America, or I-RECs for global operations, ClimatePartner helps you identify, procure, and retire the right certificates to reduce your market-based scope 2 emissions aligned with the GHG Protocol's Scope 2 Quality Criteria.

Build a credible reduction strategy

Reducing scope 2 isn't just about buying certificates. Our consultants work with you on improving energy efficiency and setting credible science-based targets.

Ready to get your scope 2 reporting right?

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