Location-based vs. market-based Scope 2: why we don't pick one for you
The GHG Protocol allows two ways to count emissions from purchased electricity, and they can produce very different numbers. Most tools quietly choose one. ECOT reports both.
Edat Hub team··2 min read
Scope 2 covers the emissions from electricity, steam, heat and cooling that an organisation buys. It sounds like the simplest part of a carbon inventory: take your meter readings, multiply by an emission factor, done. The complication is in the emission factor, because the GHG Protocol recognises two legitimate ways to choose it.
Method one: location-based
The location-based method uses the average emissions intensity of the grid where the electricity is consumed. In the United States, that usually means the EPA's eGRID subregion factors. If your facility sits in a region with a lot of coal generation, your location-based figure will be high, regardless of what kind of electricity contract you hold.
Location-based results describe the physical reality of the grid you draw from. They are hard to change in the short term and easy to compare between organisations in the same region.
Method two: market-based
The market-based method uses the emissions associated with the electricity you have chosen to buy. That includes energy attribute certificates such as renewable energy certificates, power purchase agreements, green tariffs and supplier-specific emission rates. Where you hold no such instruments, you use a residual mix factor.
Market-based results describe your purchasing decisions. They can fall sharply when an organisation signs a renewable contract, even though the wires into the building carry the same electrons as before.
Why the gap matters
For the same organisation in the same year, the two methods can produce very different totals. An organisation buying certificates to cover its full consumption might report near-zero market-based Scope 2 alongside a substantial location-based figure. Both numbers are correct. They answer different questions.
- Location-based answers: what emissions does the grid produce to supply our consumption?
- Market-based answers: what emissions are attached to the electricity we chose to buy?
The GHG Protocol's Scope 2 Guidance asks organisations that operate in markets with contractual instruments to report both, which is known as dual reporting. In practice, many tools calculate whichever is easier and present it as "your Scope 2". The reader never sees the choice that was made.
What ECOT does
ECOT calculates both figures from the same activity data and reports them separately. You enter consumption once, add any contractual instruments you hold, and ECOT produces a location-based result and a market-based result side by side.
Showing both also makes progress more honest. If market-based emissions fall while location-based emissions stay flat, you know the change came from contracts rather than from using less energy. Both are worth doing, but they are not the same achievement.