🔌 Scope 2 emissions explained in detail
Scope 2 emissions are indirect greenhouse gases (GHGs) emitted during the generation of electricity, steam, heat, or cooling purchased by a company. To calculate Scope 2 emissions, businesses must gather data on energy consumption and emission factors. There are two primary methods for calculation: location-based and market-based. Businesses can reduce Scope 2 emissions by setting targets, partnering with suppliers, and implementing energy efficiency programs.
What are Scope 2 emissions?
Scope 2 emissions encompass greenhouse gases (GHGs) emitted during the generation of electricity, steam, heat, or cooling that is purchased and consumed by a company. Because these emissions come from power plants and other generation facilities, not from sources owned or controlled by the company, they are considered indirect emissions. Scope 2 only accounts for GHGs emitted during the production of energy. Other indirect emissions occurring in the extraction, processing, transmission, and distribution of fuels fall under the Scope 3 category.
How to calculate Scope 2 emissions?
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Gather data
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Energy Consumption: Collect data from your utility companies
- Utility bills or invoices: Extract usage data (e.g., kWh) from paper or electronic documents.
- Metre readings: Retrieve consumption data directly if available.
- Electronic data: Many utilities offer data via APIs, Excel sheets, or CSV files.
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Emission Factors: Choose the appropriate factor based on your accounting method
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Location-Based: Use the average emission factor for your region, reflecting
the energy mix of your power grid. Find this information from
- Regulators or government agencies responsible for energy in your location.
- Your local utility company may also publish it.
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Market-Based: This method accounts for purchased renewable energy
certificates (RECs) or other instruments representing clean energy
investments. Determine the emission factor based on
- Attribute certificates (RECs): Use the emission factor mentioned in the certificate itself (often zero for renewables).
- Suppliers or utility companies: Some may provide factors based on your specific energy sources.
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Location-Based: Use the average emission factor for your region, reflecting
the energy mix of your power grid. Find this information from
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Energy Consumption: Collect data from your utility companies
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Choose Your Method: There are two main methods for calculating Scope 2 emissions.
- Location-Based: Uses the average emission factor for your location, regardless of your specific energy sources.
- Market-Based: Accounts for any purchased RECs or other instruments representing clean energy investments, reflecting your commitment to renewable energy.
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Calculate emissions
- Use the formula: Scope 2 Emissions (tCO2e) = Activity Data (kWh) x Emission Factor (tCO2e/kWh)
Location based Vs Market based method for Scope 2
The Greenhouse Gas Protocol (GHG Protocol) provides two main methods for calculating Scope 2 emissions: Location based method and Market based method.
What is a location based method?
This method calculates emissions based on the average emission factors of the electricity grid in the regions where a company operates. It offers simplicity and transparency, reflecting the overall GHG intensity of the grids used. However, it doesn't account for a company's specific efforts towards cleaner energy sources.
What is a market based method?
This method reflects emissions based on the electricity contracts a company has chosen. It uses emission factors derived from contractual instruments, allowing companies to showcase their individual procurement choices and influence suppliers. Additionally, it offers transparency in energy procurement strategies, enabling better risk assessment and opportunity identification.
How to choose the right method?
Selecting the best method for calculating Scope 2 emissions boils down to your organisation's specific goals and priorities. While the location-based method offers simplicity and reflects the overall impact of the grid you utilise, it doesn't acknowledge your efforts towards cleaner energy sources. Conversely, the market-based method allows you to showcase your individual choices, facilitating a deeper understanding of risks and opportunities, but it requires additional data and may be more complex to implement.
However, if your company participates in a GHG program, it's crucial to consult its specific guidance. Notably, if you report under the GHG Protocol and operate in an energy market offering differentiated products, you're required to report both location-based and market-based Scope 2 emissions. This ensures comprehensive and transparent reporting of your environmental impact.
Grid Purchase Vs. Onsite Generation
Companies that own and operate distributed power generation facilities may have scope 1 emissions from their own onsite generation, as well as scope 2 emissions from electricity purchased from the grid. For accurate scope 2 greenhouse gas accounting, companies should use their total or gross electricity purchases from the grid, rather than net purchases after subtracting any electricity exported to the grid.
How to distinguish Scope 1 and Scope 2 emissions based on electricity production and distribution scenario?
Greenhouse gas emissions from electricity generation come from specific sources owned and operated by electricity producers. After electricity is generated, it is either used on-site or sent to another place through direct wire transfer or the power grid. How these electricity pathways work, along with any contract or certificate sales from electricity, determines how energy generation emissions are tracked.
| Scenario | Scope identification |
|---|---|
| Consumed electricity comes from owned/operated equipment | In situations where an entity generates and uses its own electricity within its operational boundary, no scope 2 emissions from purchased electricity need to be reported. |
| Consumed electricity comes from a direct line transfer | Company consuming the energy reports under Scope 2, whereas company generating the energy reports under Scope 1 |
| Consumed electricity comes from the grid | Company consuming the energy reports under Scope 2, whereas company generating the energy reports under Scope 1 |
| Consumed electricity comes from owned or operated equipment, and some is purchased from the grid |
Companies that own and operate distributed power generation facilities may have scope 1 emissions from their own onsite generation, as well as scope 2 emissions from electricity purchased from the grid. This is because any renewable energy certificates or other green attributes that are sold from the company's own generation are no longer able to be claimed by the company. For accurate scope 2 greenhouse gas accounting, companies should use their total or gross electricity purchases from the grid, rather than net purchases after subtracting any electricity exported to the grid. If a company is unable to distinguish between its gross and net grid purchases, it should acknowledge and provide justification for this in the emissions inventory. |
Taking Action for a Sustainable Future
Businesses hold significant power in shaping a sustainable future. By publicly outlining ambitious Scope 2 reduction targets, partnering with suppliers on clean energy solutions, and actively participating in national renewable energy programs, they can drastically reduce their carbon footprint. Implementing robust energy efficiency programs further strengthens their commitment to environmental responsibility.