Scope 2 GHG Emissions
Scope 2 emissions from purchased electricity must be disclosed using two methods under ESRS E1-6 — location-based and market-based. These figures can differ dramatically depending on your renewable energy procurement. Understanding both is essential.
Scope 2 emissions from purchased electricity must be disclosed using two methods under ESRS E1-6 — location-based and market-based. Location-based Scope 2 uses the average emission factor for the national or regional grid where your electricity is consumed.
Location-based vs market-based — the key difference
Location-based Scope 2 uses the average emission factor for the national or regional grid where your electricity is consumed. It reflects the actual carbon intensity of the electricity mix in your area regardless of what you pay for.
Market-based Scope 2 uses emission factors from the specific electricity instruments you have contracted — renewable energy certificates (RECs), Guarantees of Origin (GOOs), power purchase agreements (PPAs), or your utility supplier's specific product factor.
If you purchase GOOs from 100% renewable energy, your market-based Scope 2 can be zero even if the grid in your country is coal-heavy. Your location-based figure will still reflect the grid average.
Why ESRS requires both figures
EFRAG requires both methods because each tells a different story. Location-based shows your physical contribution to grid emissions — relevant for system-level carbon accounting. Market-based shows your financial support for renewable energy — relevant for tracking your procurement strategy.
Investors and NGOs scrutinise the gap between the two figures. A large gap (low market-based, high location-based) indicates you are buying GOOs or RECs without physically receiving renewable electricity — sometimes criticised as 'paper renewables'.
Guarantees of Origin and renewable energy certificates
GOOs (EU) and RECs (US/other) are certificates that represent 1 MWh of electricity generated from renewable sources. Purchasing GOOs allows you to claim zero market-based Scope 2 for the covered consumption.
However, GOOs have come under criticism: they may be from renewable sources in a different country, at a different time of day, and the additionality of the renewable capacity is often questioned. The GHG Protocol's Scope 2 guidance requires quality criteria — matching vintage, technology, and geography — which many cheap GOO products do not meet.
Frequently asked questions
Which emission factors should I use for location-based Scope 2?
Use the IEA Emissions Factors (annual publication) or national grid operator factors for your country. For EU companies, the European Environment Agency publishes annual country-specific grid emission factors.
Can market-based Scope 2 be negative?
No. Market-based Scope 2 has a minimum of zero — you cannot claim negative emissions from renewable energy procurement. Excess GOOs beyond your consumption cannot offset other emission sources.
Do PPAs reduce market-based Scope 2?
Yes. Power Purchase Agreements directly with renewable generators qualify as a market-based instrument under the GHG Protocol Scope 2 Guidance, provided the PPA meets the quality criteria (same grid, contemporaneous matching increasingly expected).