(2) Scope 2-Emissions: Market- und Location-Based Approach

What are Scope 2 emissions?

Scope 2 emissions comprise the indirect greenhouse gas emissions resulting from the purchase of purchased energy (mainly electricity, steam, heating or cooling). These emissions are usually generated by an external energy supplier, but are attributed to the company that uses the energy.

Market-based vs. location-based approach

The GHG Protocol requires companies to report their Scope 2 emissions (where possible) using two methods:

Location-Based Approach

The location-based approach refers to the average emission factors of the electricity grid in a specific geographic region. This means that a company's emissions are based on the regional or national energy mix, regardless of which specific energy source the company actually uses.

• Emissions are calculated by multiplying the energy consumption by the average emission factor of the electricity grid from which the energy is sourced. These emission factors are often published by governments or international organizations.
• They do not take into account specific energy contracts or certificates, but the average carbon footprint of electricity production in a specific region or country (e.g. the national grid mix).
• Sources for emission factors include national environmental authorities or organizations such as the International Energy Agency (IEA).

On Daato, you can find the location-based emission factors using our Smart Search - simply search for the electricity mix in your region.

Market-based approach

The market-based approach, on the other hand, takes into account the specific energy sources that a company has contractually agreed. It uses the emission factor of the actual energy source that the company chooses, such as renewable energy certificates (RECs) or green energy contracts.

• The market-based approach takes into account the specific power purchase agreements and certificates that a company has concluded.
• These include, for example, guarantees of origin (RECs, PPAs), which prove that the electricity purchased comes from renewable sources.
• If no specific contract exists, default values (“residual mix”) must be used, which represent the average electricity mix that has not been claimed through renewable guarantees of origin.
• This approach therefore reflects the company's conscious purchasing decisions for low-emission or renewable electricity.

Why are both methods important?

• Location-based shows the emissions based on the actual energy infrastructure on site and is therefore a realistic reflection of the local energy supply.
• Market-based enables companies to make their renewable energy purchasing strategies transparent and show the impact their decisions have on reducing emissions.

No double counting of emissions in Scope 2

The double specification of market-based and location-based does not mean that electricity consumption is included twice in Scope 2.

On Daato, this is solved as follows:

• Companies indicate both values (if any) for their Scope 2 emissions.
• They can specify whether an activity is considered market-specific or location-specific.
• They also specify which emissions value is included in the corporate carbon footprint (CCF). By default, all activities and emissions are included. You can exclude activities using the slider.