5.2 Approaches to Accounting for Scope 2 Emissions
The glossary of the Scope 2 Guidance defines Scope 2 emissions as
“[i]ndirect emissions from the generation of purchased or acquired electricity,
steam, heat or cooling consumed by the reporting company.” There are two distinct
approaches to calculating Scope 2 emissions, each of which provides information that
can help users of GHG emission reports make decisions.
Scope 2 Guidance, Chapter 1, “Introduction,” Page 8
1.5 Guidance Overview . . .
A location-based method reflects the average emissions
intensity of grids on which energy consumption occurs (using
mostly grid-average emission factor data). A market-based
method reflects emissions from electricity that
companies have purposefully chosen (or their lack of
choice).
As noted above, the location-based method reflects the GHG emissions
associated with the generation of the electricity supplied to the grid on which the
entity is located (and where electricity is consumed). The market-based method
factors in choices a company may make in selecting specific electricity sources (or
the lack of selection if such options are available). If a company has any
operations in a market where product- or supplier-specific data in the form of
contractual instruments exist, it is required to report Scope 2 emissions under both the location-based method and the market-based method,
with each method appropriately labeled. See Section 5.7 for an illustrative example of how
a company would present Scope 2 emissions under both methods.
The table below compares the
market-based and location-based methods.
Scope 2 Guidance, Chapter 4, “Scope 2 Accounting Methods,”
Page 26
4.1.1 Location-Based Method . . .
Table 4.1 Comparing Market-Based and Location-Based
Methods
5.2.1 Location-Based Method
The location-based method can be applied in all locations since the generation
and distribution of electricity to end users is generally consistent across all
grids.
Scope 2 Guidance, Chapter 4, “Scope 2
Accounting Methods,” Page 25
4.1.1
Location-Based Method . . .
The location-based method is based on
statistical emissions information and electricity output
aggregated and averaged within a defined geographic
boundary and during a defined time period. [Footnote
omitted]
5.2.2 Market-Based Method
The market-based method is applicable in markets where contractual instruments,
including supplier-specific products, are available, regardless of whether the
company purchases any contractual instruments or supplier-specific products for
the electricity consumption. This method reflects the GHG emissions associated
with the choices a company makes regarding the electricity it consumes. A
company can choose a specific supplier, a specific generator (e.g., a wind
farm), a differentiated electricity product, or the purchase of energy attribute
certificates, all of which would be determined through contractual agreements
between the company and the provider. If a company consumes electricity in a
market where contractual instruments are available, but the company does not
specifically contract to obtain electricity from a particular source, its
reporting under the market-based method will reflect the absence of contractual
instruments. That is, its market-based reporting will reflect the GHG emissions
associated with any energy supplied to the grid from sources not contracted to
others. This is referred to as the “residual mix.” See Section
5.6.2.2.4 for more information about the residual mix and
Section 5.6.2.2.5 for information about how the
residual mix fits into the market-based method emission factor hierarchy.
Scope 2 Guidance, Chapter 4, “Scope 2 Accounting
Methods,” Page 26
4.1.2 Market-Based Method . . .
Under the market-based method of scope 2 accounting, an
energy consumer uses the GHG emission factor associated
with the qualifying contractual instruments it owns. In
contrast to the location-based method, this allocation
pathway represents contractual information and claims
flow, which may be different from underlying energy
flows in the grid.