The Scope 2 Market-Based Method for calculating greenhouse gas (GHG) emissions focuses on using emission factors that reflect the specific electricity purchases of an organization, rather than using the average emissions from the local grid (which is the approach for the Location-Based Method). The Market-Based Method allows companies to report emissions based on their chosen electricity supply contracts, renewable energy purchases, and specific supplier information.
Key Emission Factors for Scope 2 Market-Based Method
- Supplier-Specific Emission Factors
- Companies can use emission factors provided by their electricity suppliers if those factors are verified. This reflects the actual emissions associated with the specific electricity purchased from that supplier.
- Example: If a company buys electricity from a supplier that provides 100% renewable energy, the emission factor may be close to zero, depending on the renewable energy source and certification.
- Energy Attribute Certificates (EACs)
- Companies can procure EACs to support their Market-Based Method calculations, such as:
- Renewable Energy Certificates (RECs) in the United States
- Guarantees of Origin (GOs) in the EU
- International RECs (I-RECs) for other regions
- When using EACs, the emission factor for the amount of energy matched by certificates is often considered zero, reflecting the renewable nature of the sourced electricity.
- Residual Mix Emission Factors
- If supplier-specific factors or EACs are not available, companies should use residual mix emission factors. These represent the average emissions intensity of the remaining electricity on the grid after accounting for all renewable energy claims.
- Residual mix factors tend to be higher than grid-average emission factors because they exclude the cleaner, renewable energy that has already been claimed through EACs.
- Contractual Emission Factors
- These are based on specific power purchase agreements (PPAs) or other contractual arrangements between the company and electricity providers.
- For example, if a company has a PPA for wind or solar energy, the emission factor may be close to zero or significantly lower than the regional average.
- Certified Green Power Programs
- Participation in certified green power programs (e.g., EPA’s Green Power Partnership in the U.S.) allows companies to use the certified emission factors associated with those programs.
Calculating Emissions Using the Market-Based Method
To calculate Scope 2 emissions using the Market-Based Method, companies use the following formula:
Scope 2 Emissions (Market-Based) = ∑ (Electricity Consumed (MWh) × Emission Factor (kg CO₂e/MWh))
Steps for Calculation:
- Identify the total electricity consumption (in MWh).
- Determine the appropriate emission factors based on supplier-specific data, EACs, contractual arrangements, or residual mix factors.
- Multiply the electricity consumption by the corresponding emission factor.
Reporting Considerations
- Companies should disclose both Location-Based and Market-Based Scope 2 emissions to provide a comprehensive view of their GHG impact.
- Transparent reporting of the types of emission factors used (e.g., supplier-specific, residual mix) and any EACs or contractual instruments is essential.
- The use of zero-emission factors for renewable energy purchases must be substantiated by matching the purchased electricity with the volume of EACs held.
Challenges with Market-Based Emission Factors
- Data Availability: Obtaining supplier-specific or residual mix emission factors can be challenging in regions where such data is not readily accessible.
- Verification: The credibility of Market-Based Method calculations depends on the quality and verification of supplier-provided data and EACs.
- Complexity: Managing multiple contracts, EACs, and diverse suppliers can add complexity to emissions accounting.
Examples of Emission Factors
- Supplier-Specific Emission Factor: 0.10 kg CO₂e/MWh (based on a verified renewable energy supply contract)
- REC-backed Electricity: 0 kg CO₂e/MWh (for fully matched renewable energy purchases)
- Residual Mix Factor in Europe: Approximately 0.45-0.55 kg CO₂e/MWh (varies by country)
The Market-Based Method provides a way for companies to align their emissions reporting with their sustainability strategies, especially when investing in renewable energy.
