Location-based vs market-based Scope 2: what each method measures

Scope 2 covers the emissions from generating the electricity, heat, steam and cooling your company buys. The GHG Protocol Scope 2 Guidance (2015) defines two ways of calculating them, and many companies have to report both.

The two methods in one sentence each

The guidance defines them as follows:

• Location-based: "A location-based method reflects the average emissions intensity of grids on which energy consumption occurs".
• Market-based: "A market-based method reflects emissions from electricity that companies have purposefully chosen (or their lack of choice)."

In practice, the location-based figure is your consumption multiplied by a published grid average, such as the UK factor from DESNZ or the Italian factors from ISPRA. The market-based figure uses the emission rate attached to what you actually contracted for, such as a supplier's fuel mix, a renewable electricity contract or certificates, and falls back to a residual mix where you have none.

When you must report both

The guidance states that companies with operations in markets providing product- or supplier-specific data in the form of contractual instruments "shall report scope 2 according to a location-based method and a market-based method." Europe, including the UK and Italy, is such a market, so most European companies report two Scope 2 totals. The location-based total shows the grid you depend on; the market-based total shows the effect of your purchasing choices.

What counts as contractual evidence

The guidance calls certificates and similar documents energy attribute certificates: "A category of contractual instrument that represents certain information (or attributes) about the energy generated", which "does not represent the energy itself."

In Europe the main instrument is the guarantee of origin (GO). According to the Association of Issuing Bodies, GOs "have the purpose of showing to a final customer that a given share or quantity of energy was produced from renewable sources", with the legal basis in Article 19 of the Renewable Energy Directive.

To be used in a market-based figure, an instrument has to meet the guidance's eight Scope 2 Quality Criteria. Among them, instruments must:

• "Convey the direct GHG emission rate attribute associated with the unit of electricity produced";
• "Be tracked and redeemed, retired, or canceled by or on behalf of the reporting entity";
• "Be issued and redeemed as close as possible to the period of energy consumption to which the instrument is applied";
• be sourced from the same market as the electricity-consuming operations.

The residual mix

Electricity that you buy without a qualifying instrument is not zero-emission and not the grid average either. The market-based method uses a residual mix, which the guidance describes as "the emissions rate left after the three other contractual information items are removed from the system", in other words the average of the untracked or unclaimed energy once renewable claims backed by certificates have been taken out. Because renewables sold with certificates are removed, a residual-mix factor is often higher than the location-based grid average.

A short example

A company in Italy uses 100,000 kWh in 2024, half of it covered by guarantees of origin from a renewable supplier.

• Location-based: 100,000 kWh × the ISPRA consumption factor for 2024 (192.6 g CO2/kWh) = 19,260 kg CO2. See the guide to Italian electricity factors.
• Market-based: 50,000 kWh covered by GOs at the contractual emission rate (zero for the renewable generation), plus 50,000 kWh at a residual-mix factor. The second half needs a residual-mix value from a published source; LCALens does not ship residual-mix data, so you record the factor and its source yourself.

Both totals go in the report, each labelled with its method.

What is changing

The GHG Protocol is revising the Scope 2 Guidance. A public consultation ran from 20 October 2025 and was extended to 31 January 2026. The proposal keeps both methods, introducing "targeted improvements to enhance accuracy and transparency across both", with "a new hourly matching and deliverability requirement for market-based reporting" as the central change. Final publication is "expected in 2027". Until a revised standard is published, the 2015 guidance applies.

In LCALens

• Electricity (location-based), UK and Electricity, Italy give the location-based figure with the source row shown.
• For the market-based figure, signed-in users record their supplier's or certificate's emission rate as a private factor, with the contract or certificate attached as evidence; inventories then show both Scope 2 totals side by side.