Scope 2 covers indirect emissions from purchased or acquired electricity, steam, heat, and cooling. For many companies, reporting Scope 2 requires two totals: location-based and market-based.
These are not competing estimates of one unknowable answer. They describe purchased energy through different allocation methods and should be labelled clearly.
What the location-based method shows
The location-based method reflects the average emissions intensity of the grids where energy consumption occurs. Electricity use is multiplied by an emission factor for a defined geographic area and period.
This result helps users understand exposure to the physical generation mix serving operations. It is particularly useful for comparing locations, improving energy efficiency, and evaluating how grid decarbonization affects the inventory.
Choose the most appropriate accessible factor for the geography and reporting period. Record the factor source, publication year, covered year, unit, and any conversion applied.
What the market-based method shows
The market-based method reflects emissions associated with contractual instruments and supplier or product choices. These may include qualifying supplier-specific information, power purchase agreements, green tariffs, energy attribute certificates, and residual mix data.
The GHG Protocol Scope 2 Guidance sets eight quality criteria for contractual instruments used in the market-based method. A claim of “renewable” or “zero carbon” on a bill is not enough by itself. The instrument and associated attributes need to meet the applicable criteria.
If product- or supplier-specific information is not available, the market-based hierarchy may lead to a residual mix and, only in the absence of the higher-priority information, another permitted factor. The exact hierarchy and market availability should be assessed and documented.
When dual reporting applies
Under the current GHG Protocol guidance, companies with operations in markets where product- or supplier-specific information is available in contractual instruments report both location-based and market-based totals. This is commonly called dual reporting.
A company without a special renewable-energy purchase may still need dual reporting. Supplier-specific data, residual mix information, and the characteristics of the market—not only the company’s procurement strategy—matter to the assessment. The Scope 2 FAQs provide examples of the hierarchy and dual-reporting requirement.
Five common accounting errors
1. Using the electricity bill’s cost instead of consumption
Scope 2 is normally calculated from energy consumed, such as kilowatt-hours, not the amount paid. Keep cost for reconciliation, but calculate from the correct activity unit.
2. Treating every supplier factor as market-based quality data
Ask what the factor covers, how it was calculated, and whether the contractual information meets the Scope 2 quality criteria.
3. Applying certificates to the wrong period or market
Check quantity, generation period, geographic market boundary, ownership, retirement, and uniqueness of the claim.
4. Combining the two totals
Do not add location-based and market-based results together. They are two views of the same purchased-energy activity.
5. Failing to preserve the calculation hierarchy
Store the data source considered at each level and why the selected factor was used. This makes the choice reviewable and repeatable.
Build one data model that can calculate both
At minimum, retain facility, meter or account, consumption, unit, period, geography, supplier, electricity product, contractual instrument, certificate quantity, factor, factor version, and supporting evidence.
Separate activity data from factor and instrument data. That allows the same consumption record to support both methods without duplicating or overwriting inputs.
GHG Protocol completed a consultation on proposed revisions to Scope 2 Guidance in January 2026. As of this article’s March 19, 2026 publication date, teams should distinguish existing requirements from proposals and monitor the official Scope 2 page for updates.
Sources
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