According to the EPA, over 25% of 2020 greenhouse gas emissions came from electricity production. In most cases, electricity emissions are calculated under Scope 2 in the Greenhouse Gas Corporate Protocol. While Scope 2 also includes heat, steam, and cooling systems, electricity emissions are the second largest source of global emissions. Reporting these emissions accurately is crucial. There are two ways to calculate Scope 2 emissions: Location-based and Market-based.
The GHG Corporate Standard requires organizations to use both location-based and market-based calculation due to the complexity created by consumer choice in electricity suppliers and products. Each reporting method shares key information about a company’s emissions. The location-based method reveals what emissions the company is physically creating, while the market-based approach shows the emissions the company is culpable for through purchasing decisions. Let’s look deeper at each type of reporting.
Location-Based Reporting
The location-based method calculates emissions based on the emissions intensity of the local power grid where the company’s electricity usage occurs. This method is useful for understanding the physical impacts of energy consumption but does not consider renewable energy sources, leaving consumption reduction as the only way to lower these Scope 2 emissions.
Market-Based Reporting
Calculating emissions with the market-based method allows a company to take renewable energy use into account. Because the market-based method uses information from electric utilities contracts, it reveals a more detailed picture of that company’s emissions associated with its contractual arrangements.
This method also encourages companies to be more sustainable because it takes renewable solutions into account in a way that location-based reporting does not. Energy sources such as solar power would be negligible in a solely location-based report but significant in the market-based method.
Location-based and market-based methods are both valuable tools to understand a organization’s Scope 2 greenhouse gas emissions. Using both methods allows for full accountability and promotes sustainable energy consumption choices. Because electricity is one of the largest contributors to greenhouse gas emissions, it is important to have a full picture of electricity consumption.
While calculating these reports can be complicated, Net Zero Cloud does the heavy lifting for you. Simply record your activity and consumption data. Then Net Zero Cloud can calculate both location-based and market-based emissions reports for your organization.