Chapter 5 — GHG Protocol Scope 2 Guidance

5.7 Reporting

As noted in Section 5.1, the Scope 2 Guidance acts as an amendment to the Corporate Standard and provides new requirements specific to calculating and reporting Scope 2 emissions. As a result, a company preparing and reporting a GHG inventory in accordance with the Corporate Standard will also need to comply with all of the requirements of the Scope 2 Guidance. See Section 4.3 for more information about the reporting requirements of the Corporate Standard.

5.7.1 Required Reporting

The Scope 2 Guidance includes reporting requirements related to the following:

Operations in only one or more markets that do not provide any contractual instruments — If a company has operations in only one or more markets that do not provide any contractual instruments (including supplier-specific emission data), it is only required to report Scope 2 emissions under the location-based method.
Operations in one or more markets that provide contractual instruments — 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. The following is an illustrative example of how a company could present Scope 2 emissions under both methods:

GHG Emissions by Scope (Metric Tons CO2 Equivalent)

In the illustrative example above, the Scope 2 emissions reported under the market-based method are significantly lower than those reported under the location-based method. This is because the company in the example purchases many contractual instruments in an effort to achieve net-zero emissions. Although this may not always be the case in practice, the example demonstrates how the Scope 2 emissions reported under each of the methods may be dramatically different depending on the company’s electricity procurement methods.

Many companies may find that as a result of their mix of operations globally, the market-based method will be applicable to only some of their operations because of the availability of contractual instruments in certain markets. Nevertheless, companies are required to account for and report their Scope 2 emissions under both methods for all of their operations. To do this, companies are required to use the location-based emission factors for operations in which no market-based method emission factors are available. Consequently, it is recommended that companies include in their disclosures the percentage of their overall Scope 2 market-based method emissions that reflects markets with contractual instruments.
Inventory totals — If a company chooses to present Scope 1 and Scope 2 emissions in total, it may present either (1) two totals (one that reflects Scope 2 emissions calculated under the market-based method and another that reflects Scope 2 emissions calculated under the location-based method) or (2) just one total that reflects one of the methods used to calculate Scope 2 emissions. However, if a company is reporting only a single total, it is required to disclose which method it used. See the illustrative example above, which demonstrates how a company could present a single inventory total with appropriate disclosure of the Scope 2 method used in the total.
Scope 2 Quality Criteria — As discussed in Section 5.6.2.2, when companies apply the market-based method, they are required to evaluate the contractual instruments from which their GHG emission factors are derived to ensure that those instruments meet the Scope 2 Quality Criteria (which are further discussed in Section 5.7.3). If the contractual instruments do not meet the Scope 2 Quality Criteria and alternative market-based data are available, companies are required to use such data, in which case they would need to apply the market-based method emission factor hierarchy from most precise to least precise (see Section 5.6.2.2.5 for further discussion).

If a residual mix emission factor is not available, companies are required to disclose that (1) such a factor was not available or has not been estimated and (2) its absence may result in double counting of Scope 2 emissions between consumers.
Method disclosure — Companies are required to disclose the method(s) used in their Scope 2 accounting. For the market-based method, companies are required to disclose the categories of contractual instruments from which their emission factors were derived. The following is an example of how this disclosure may look:

Illustrative Disclosure

Market-Based Method

The market-based method includes consideration of contractual arrangements under which the Company procures power from specific suppliers or generation sources, such as renewable energy. Under the market-based method, the Company also accounts for purchases of renewable energy as well as purchases of energy attribute certificates.
Base-year information — In a manner consistent with the reporting requirements of the Corporate Standard, the Scope 2 Guidance requires companies to disclose their base-year information, including the year chosen as the base year and the context for their base-year recalculation policy. See Section 4.1.1 for discussion on establishing a base year and Section 4.1.3 for discussion on recalculating base-year emissions. However, because of the dual-reporting requirements under the Scope 2 Guidance, companies are also required to report the following with respect to their chosen base year for Scope 2 emissions:
- The method used to calculate the Scope 2 emissions for the base year (i.e., location-based or market-based).
- Whether location-based data were used as an alternative for calculating the base-year Scope 2 emissions under the market-based method.
Disclosure of basis for goal setting — The Scope 2 Guidance contains the following requirement for companies that set a GHG emission reduction goal:

Scope 2 Guidance, Chapter 7, “Accounting and Reporting Requirements,” Page 61

7.1 Required Information for Scope 2 . . .

If a company sets a corporate inventory reduction goal and/or a scope 2-specific reduction goal, the company shall clarify whether the goal is based on the location-based method total or market-based method total.

5.7.2 Recommended Reporting

Various disclosures outlined in the Scope 2 Guidance are recommendations. Although not required, these disclosures warrant careful consideration in light of the GHG accounting and reporting principles to ensure that the reported information on Scope 2 emissions is what the Scope 2 Guidance describes as “a faithful, true, and fair account of a company’s GHG emissions.”

The recommended disclosures are as follows:

Annual electricity consumption — It is recommended that companies report their total electricity consumption during the reporting period in relevant units (e.g., kWh, MWh, BTU) as well as the portion of electricity consumed that came from owned or operated equipment. As discussed in Section 5.4, GHG emissions related to electricity consumed by the reporting company that was generated by equipment the company owned or operated may be reported in Scope 1 rather than Scope 2. Further, if management discloses its annual electricity consumption, the Scope 2 Guidance recommends reporting that disclosure separately from the scopes totals.
Biogenic emissions — The Scope 2 Guidance recommends disclosure of information about biogenic emissions as follows:
Scope 2 Guidance, Chapter 7, “Accounting and Reporting Requirements,” Page 61
7.2 Recommended Disclosure . . .
Companies should separately report the biogenic CO2 emissions from electricity use (e.g. from biomass combustion in the electricity value chain) separately from the scopes, while any CH4 and N2O emissions should be reported in scope 2.

Companies should document if any GHG emissions other than CO2 (particularly CH4 and N2O) are not available for, or excluded from, location-based grid average emissions factors or with the market-based method information.
Other instrument retirement — The Scope 2 Guidance recommends that companies disclose whether any instruments (beyond the contractual instruments included in the market-based method emission factor hierarchy, which is discussed in Section 5.6.2.2.5) are retired “in conjunction with their voluntary claim, such as with certificate multipliers or any pairing required by regulatory policy.”

The Scope 2 Guidance provides additional information about certificate multipliers as follows:

Scope 2 Guidance, Chapter 10, “Key Concepts and Background in Energy Attribute Certificates and Claims,” Page 85

10.5.1 Certificate Multipliers

Some jurisdictional compliance programs provide additional incentive for specific energy sources by providing a “credit multiplier” to a certificate when it is redeemed for compliance with program requirements. The multiplier is applied only when the certificate is redeemed for supplier quota compliance. For instance, a credit multiplier of 1.5 means that when a certificate is retired and claimed for compliance, it is counted toward compliance as if it were 1.5 certificates. Suppliers using certificates for disclosure should use the attributes stated in the certificate (per MWh) and not its multiplication for policy compliance.
Basis for upstream Scope 3, Category 3 — Scope 3, Category 3, includes GHG emissions related to the production of fuels and energy purchased and consumed by a reporting company in the reporting year that are not included in Scope 1 or Scope 2. If a reporting company is providing information about its GHG emissions to third parties in its value chain so that those third parties can report their Scope 3 emissions (since the Scope 1 and Scope 2 emissions of one company are the Scope 3 emissions of another), the Scope 2 Guidance recommends that the reporting company include in that information the method it used (i.e., location-based or market-based) to calculate its Scope 2 emissions. Doing so will enable the third parties to meet the requirement to disclose whether a market-based or location-based Scope 2 total was used as the basis for calculating their Scope 3, Category 3, emissions.

See Section 6.3.3 for further discussion of Scope 3, Category 3.
Instrument features — The Scope 2 Guidance recommends disclosure of information about instrument features as follows:

Scope 2 Guidance, Chapter 7, “Accounting and Reporting Requirements,” Page 61

7.2 Recommended Disclosure . . .

Where relevant, companies should disclose key features associated with their contractual instruments claimed, including any instrument certification labels that entail their own set of eligibility criteria, as well as characteristics of the energy generation facility itself and the policy context of the instrument.
Role of corporate procurement in driving new projects — The Scope 2 Guidance recommends providing additional qualitative disclosures, if relevant, about how the contractual instruments the reporting company used under the market-based method are driving the company’s lower-carbon initiatives.

5.7.3 Scope 2 Quality Criteria

The Scope 2 Guidance includes Scope 2 Quality Criteria, a set of requirements designed to maintain the integrity of the market-based method. When applying the market-based method, companies are required to evaluate their contractual instruments from which the GHG emission factor is derived to ensure that those instruments meet the Scope 2 Quality Criteria. For Scope 2 emissions reported under the market-based method to be what the Scope 2 Guidance characterizes as “a faithful, true, and fair account,” contractual instruments used under that method must accurately reflect consumers’ GHG emission claims to prevent double counting.

Scope 2 Guidance, Chapter 7, “Accounting and Reporting Requirements,” Page 63

7.5 Additional Guidance on Scope 2 Quality Criteria

[The Scope 2 Quality Criteria] represent the minimum features necessary to implement a market-based method of scope 2 GHG accounting. Programs or jurisdictions may have additional requirements that reporting entities should consult and follow.

The Scope 2 Quality Criteria are listed in the table below.

Scope 2 Guidance, Chapter 7, “Accounting and Reporting Requirements,” Page 60

7.1 Required Information for Scope 2 . . .

Table 7.1 Scope 2 Quality Criteria . . .

The Scope 2 Criteria may be further explained as follows:

Criterion 1: conveying GHG emission rate claims — Contractual instruments may already include information about who owns or has the ability to claim specific attributes about the electricity being generated. For example, the Scope 2 Guidance notes that in the United States, RECs are defined “as conveying ‘all environmental attributes’ associated with the MWh of energy generation.” When all environmental attributes are associated with the underlying electricity to which the contractual instrument is related, the contractual instrument is considered “fully aggregated,” which means that the environmental attributes of the underlying electricity have not been disaggregated. Tracking systems generally support only certificates that are fully aggregated.

Scope 2 Guidance, Chapter 7, “Accounting and Reporting Requirements,” Page 63

7.5 Additional Guidance on Scope 2 Quality Criteria . . .

In specific cases of multipliers or issuance of multiple instruments from the same MWh, then all instruments shall be retired for a full claim on that MWh.
The following are additional considerations related to the application of Criterion 1:
- Certificates do not specify attributes — Instances may arise in which the certificate does not specify the energy attributes that are attached to it. However, such attributes may be implicitly provided to the certificate holder if the certificate holder can demonstrate that no other consumer is claiming the same energy attributes. The certificate holder can do so by obtaining attestations from each individual within the chain of custody or through other procedures that provide the same evidence.
- Energy attribute emission factor is not specified, and technology is not zero emissions — Similarly, there may be instances in which the certificate does not specify the energy attribute emission factor. In such cases, the reporting company would obtain this information from the generation facility if possible. If the information cannot be obtained directly from the generation facility, the company may use a proxy from the IPCC or an equivalent source but would disclose the use of this alternative emission factor.
Criterion 2: unique claims — Building on Criterion 1, Criterion 2 indicates that for the market-based method to be reliable, the energy attributes of the underlying electricity generation being claimed by the reporting company must only be claimed once (i.e., others must not make claims to the same attributes). Companies must therefore ensure that any claims they are making are unique and that the GHG emission factor they are claiming is a unique claim.
Criterion 3: retirement of claims — To make a claim, a company will need to redeem or retire an energy attribute certificate. Depending on the type of certificate and the market in which the company operates, redemption or retirement may be achieved through (1) a registry or tracking system, (2) a third-party certification, or (3) another mechanism. It is important for companies to understand the process by which claims are redeemed or retired and consider the evidence necessary to support the claims they are making.
Criterion 4: vintage — Vintage refers to the timing of electricity generation on which the contractual instrument is based. In the United States, vintages of RECs are often represented on a monthly basis (e.g., March 202X). Contractual instruments will contain the timing of generation of the underlying electricity.

Scope 2 Guidance, Chapter 7, “Accounting and Reporting Requirements,” Page 64

7.5 Additional Guidance on Scope 2 Quality Criteria . . .

In order to ensure temporal accuracy of scope 2 calculations, this criteria seeks to ensure that the generation on which the emission factors are based occurs close in time to the reporting period for which the certificates (or emissions) are claimed. This timing should be consistent with existing standards for the market where the contractual instruments exist.

Although the Scope 2 Guidance does not define Criterion 4’s phrase “as close as possible to the period of energy consumption to which the instrument is applied,” the excerpt immediately above explains that the “timing should be consistent with existing standards for the market where the contractual instruments exist.” Accordingly, it is recommended that companies look to market practices to determine the appropriate vintage of contractual instruments. For example, in the United States, companies often apply the Center for Resource Solutions’ Green-e® Renewable Energy Standard for Canada and the United States, which explicitly defines a 21-month vintage eligibility window for RECs that includes electricity generated in the 6 months before the calendar year, the 12 months of the calendar year, and the 3 months after the calendar year. However, such market practices will most likely continue to evolve and are therefore subject to change.
Criterion 5: market boundaries — The Scope 2 Guidance includes the following information about Criterion 5:

Scope 2 Guidance, Chapter 7, “Accounting and Reporting Requirements,” Page 64

7.5 Additional Guidance on Scope 2 Quality Criteria . . .

The market boundary criteria address the geographic boundary from which certificates can be purchased and claimed for a given operation’s scope 2 accounting and reporting.
Considerations related to Criterion 5 include the following:
- Distinguishing other relevant electricity boundaries — It is important to understand electricity boundaries and how they may differ from the boundaries of the contractual instruments that are based on the underlying electricity. The market for electricity distribution and use is a defined geographic area or region. However, certificates are often decoupled from the underlying electricity and generally provide a broader market boundary. This means that while electricity distribution markets are generally based on regional transmission or balancing areas, certificate markets may be larger (e.g., at the national level). For example, in the United States, the electric grid is split into three major regions by which electricity is physically delivered to consumers. However, since RECs are governed by federal laws and regulations, the United States serves as a single market for RECs.
- Determining market boundary — The Scope 2 Guidance includes the following recommendation for determining market boundaries:
  
  Scope 2 Guidance, Chapter 7, “Accounting and Reporting Requirements,” Page 64
  
  7.5 Additional Guidance on Scope 2 Quality Criteria . . .
  
  Companies should check whether the regulatory authorities and/or certification/issuing bodies responsible for certificates have established the boundaries in which certificates may be traded and redeemed, retired or canceled, and should follow these market boundaries.
- Market boundary is unspecified or unclear — As noted above, the market boundaries for physical electricity distribution and use (i.e., balancing areas) may be different from the market boundaries for energy attribute certificates, which may be governed by regulatory authorities or issuers of the certificates. For example, the United States currently constitutes a single market for certificates, since it is governed by federal regulations. Similarly, the European Union represents a multijurisdictional market united by a set of common market rules and a regional connection.
- Additional geographic sourcing considerations — The Scope 2 Guidance includes the following recommendation regarding additional geographic sourcing considerations:
  
  Scope 2 Guidance, Chapter 7, “Accounting and Reporting Requirements,” Page 65
  
  7.5 Additional Guidance on Scope 2 Quality Criteria . . .
  
  In addition, if not already specified by regulation or program, contractual instruments should be sourced from regions reasonably linked to the reporting entity’s electricity consumption.
  
  Factors for determining whether the market from which the certificates are sourced is reasonably linked to the market in which the reporting company’s electricity consumption occurs could include the existence of a grid connection between the two markets or relevant laws governing the electricity sector in both markets. If there is no reasonable link between the region from which the certificates are sourced and the reporting company’s electricity consumption, Criterion 5 cannot be met.
Criterion 6: supplier- or utility-specific emission factors — Supplier-specific emission factors represent the GHG intensity of electricity delivered by a specific supplier. See Section 5.6.2.2.3 for further discussion of supplier-specific emission factors.
Criterion 7: direct contracts or purchasing — When purchasing electricity directly from a generator (through a contractual arrangement), the reporting company will need to determine that the contractual arrangement enables it to claim the electricity’s attributes. That is, the reporting company is required to determine that it has the sole right to claim those attributes.

Scope 2 Guidance, Chapter 7, “Accounting and Reporting Requirements,” Page 65

7.5 Additional Guidance on Scope 2 Quality Criteria . . .

In the absence of energy attribute certificates, the contract and claim associated with it should be verified by a third party to convey a unique or sole ownership right to claim a GHG emission rate.
Criterion 8: residual mix — The residual mix represents the GHG emissions from untracked or unclaimed electricity. See Section 5.6.2.2.4 for further discussion of the residual mix.