Location-based Scope 2 reflects grid-average emissions where you consume electricity, using published grid factors regardless of what you have purchased. Market-based Scope 2 reflects the emissions tied to your contractual procurement choices, including RECs, guarantees of origin, or power purchase agreements. When those instruments exist in your market, the GHG Protocol Scope 2 Guidance requires you to disclose both figures side by side.
TL;DR:
- Location-based emissions are calculated using grid-average factors, which do not reflect any renewable energy procurement or contracts.
- Market-based emissions depend on verified instruments like RECs, PPAs, or guarantees of origin, and are valid only if these are properly retired within the correct market boundary and vintage.
- Discrepancies between location-based and market-based figures can be significant, especially when a company signs renewable contracts but grid emissions remain unchanged.
- Common audit mistakes include applying certificates across different markets, failing to retire certificates correctly, or skipping the residual mix step.
- Building a defensible Scope 2 report requires meticulous documentation and understanding of instrument quality, residual mixes, and market boundaries, which can be strengthened through formal training and accreditation.
Table of Contents
- Location-Based Method: The Grid-Average Baseline
- Market-Based Method: Accounting For What You Actually Bought
- Where The Two Numbers Diverge
- Calculating Market-Based Emissions Without Getting Flagged In Audit
- What This Means For Targets, Disclosure, and Assurance
- A Practical Checklist Before Your Next Disclosure Cycle
- Why Practitioner Training Closes the Scope 2 Credibility Gap
- Build Scope 2 Fluency Through Formal Accreditation
- Sources
Location-Based Method: The Grid-Average Baseline
The location-based method calculates emissions using the average carbon intensity of the grid serving your facility, independent of any renewable energy contracts you hold. It is the method every organization can use, everywhere, because it does not depend on market infrastructure that may not yet exist in your region.
Data comes from established, publicly available sources. Agencies like EPA eGRID, the International Energy Agency, and national environment agencies publish factors expressed in kg CO2e per kWh, broken down by subregion or national grid.
- Factors are typically updated annually and lag actual grid data by over a year.
- Coverage is near universal, making location-based the default baseline for Scope 2 inventories worldwide.
- The method cannot show whether you bought clean power. Two facilities on the same grid report identical location-based numbers even if one has signed a wind PPA and the other hasn't touched the market.
That last limitation is precisely why the GHG Protocol built a second, complementary method into the standard rather than treating location-based figures as the whole story.
Market-Based Method: Accounting For What You Actually Bought
Market-based accounting assigns emissions based on the electricity you have contractually claimed, not the physical mix flowing through the wires. If you retire a certificate tied to wind generation, you apply that certificate's emission factor, often close to zero, to your consumption.
Several instruments qualify, each with different reach and reliability:
- Energy Attribute Certificates such as RECs and Guarantees of Origin, which unbundle the environmental attribute from the physical electron.
- Power purchase agreements, where you contract directly with a generator, often at a specific project.
- Green tariffs offered by utilities in regulated markets.
- Supplier-specific emission factors, disclosed by your utility when no certificate market is available.
Every instrument must meet the Scope 2 Quality Criteria: it has to be tracked and retired through a recognized registry, convey Scope 2 attributes clearly, and match your consumption within the same market boundary. Market-based reporting only works where certificate systems actually function; in regions without one, market-based accounting has real limits, and grid decarbonization becomes the more meaningful lever.
Where The Two Numbers Diverge
Location-based measures physical grid intensity. Market-based measures procurement intent. Those are different questions, and the answers can pull apart sharply.
- A company signs a large offsite PPA for wind power. Its market-based emissions drop toward zero, while its location-based number stays flat, because the physical grid feeding its buildings hasn't changed.
- A company in a market with no certificate system defaults to grid average for both figures, and the two numbers converge because market-based has nowhere else to go.
- A company retires certificates that don't cover its full consumption. The uncovered portion falls back to the residual mix, which, as Council Fire's analysis notes, can push market-based emissions above location-based emissions in grids that are already relatively clean.
Investors, auditors, and regulators scrutinize both figures for different reasons. WRI's research frames market-based reporting as a reflection of procurement decisions, not physical grid impact, and that distinction shapes how each stakeholder group reads your numbers. A wide gap between the two invites questions about additionality; a narrow gap in a dirty grid invites questions about ambition.
Calculating Market-Based Emissions Without Getting Flagged In Audit
Getting the market-based number right means following a strict hierarchy, not picking whichever factor is convenient.
- Step 1: Supplier-specific emission factors. If your utility provides a verified, product-specific factor for the exact contract you hold, use it first.
- Step 2: Energy Attribute Certificates. Apply retired RECs, GOs, or PPA volumes matched to your consumption within the same market boundary and vintage year.
- Step 3: Residual mix. For any consumption not covered by Steps 1 or 2, apply the residual mix factor published by bodies like the Association of Issuing Bodies or your national registry.
- Step 4: Grid average, only as a last resort. Use this only where no residual mix exists and no supplier-specific data is available.
The residual mix isn't the same as the grid average. It represents what's left on the grid after every claimed megawatt-hour has been subtracted, and it's often dirtier than the grid average because the cleanest generation has already been claimed by someone else.
Three mistakes show up repeatedly in audits: applying certificates purchased in one market to consumption in another, failing to retire certificates against the correct vintage year, and skipping the residual mix step entirely by defaulting straight to grid average. Ongoing GHG Protocol technical proposals push toward hourly matching instead of annual reconciliation, which will make timing mismatches far easier to catch.
Pro Tip: Before you retire a single certificate, map your consumption by market boundary and vintage year first. Retiring certificates against the wrong boundary is the single most common finding assurance providers report, and it's entirely avoidable with a spreadsheet built before contracts get signed, not after.
What This Means For Targets, Disclosure, and Assurance
Reporting frameworks don't treat the two figures interchangeably. The Science Based Targets initiative and CDP both expect market-based figures where instruments are available, while ESRS under CSRD increasingly expects the full dual disclosure rather than a single headline number. Understanding how these metrics feed broader disclosure obligations matters as frameworks shift from TCFD toward ISSB-aligned reporting.
Assurance providers focus on a specific set of checks:
- Instrument validity and registry retirement records.
- Market boundary matching between certificates and consumption.
- Correct application of the residual mix for uncovered volumes.
- Consistency between disclosed totals and underlying contract documentation.
The gap between your two numbers is itself useful data. A large gap signals active procurement without local grid improvement. A small gap in a high-carbon grid signals limited procurement activity, not a clean footprint.
A Practical Checklist Before Your Next Disclosure Cycle
Building a defensible dual Scope 2 report comes down to documentation discipline as much as calculation accuracy.
- Collect metered consumption data by site and by billing period.
- Gather supplier-specific emission factors where your utility publishes them.
- Archive contract documents, certificate serial numbers, and retirement confirmations.
- Source your residual mix factor from the relevant national or regional registry.
- Reconcile market-based totals against location-based totals by site before publishing.
- Draft a reporting annex showing coverage percentage, market boundary, and instrument type for each claim.
When on-site generation or a direct PPA is available, prioritize it over unbundled certificates. Direct contracts carry stronger additionality signals and hold up better under scrutiny than a spot-market REC purchase made months after the fact.
Pro Tip: Keep a running log of certificate vintage years alongside your consumption calendar. Reviewers almost always ask for this first, and teams that can't produce it lose weeks re-tracing purchases that should have taken minutes to confirm.
Why Practitioner Training Closes the Scope 2 Credibility Gap
Most Scope 2 errors we see in disclosure reviews aren't calculation mistakes. They're documentation gaps: a certificate retired against the wrong vintage, a residual mix step skipped in favor of grid average, a market boundary assumption nobody checked before publishing.
Closing that gap takes specific skills: reading instrument documentation for quality criteria, sourcing the right residual mix figure, and building an audit trail before assurance providers ask for one. These aren't skills most sustainability professionals picked up by accident; they're skills built through structured training in carbon accounting methodology and disclosure practice, the kind that turns a defensible Scope 2 number into one that survives scrutiny from CDP, SBTi, and ESRS reviewers alike.
— Ransford
Build Scope 2 Fluency Through Formal Accreditation
Reading about the emission-factor hierarchy is one thing. Applying it correctly across a multi-site portfolio, under audit pressure, with residual mix data pulled from three different registries, is another. Esgtraininginstitute's accreditation programs are built for sustainability leads, risk officers, and assurance practitioners who need to move from reading GHG Protocol guidance to defending it in front of an auditor.
The curriculum maps directly to what this article covers: instrument quality assessment, residual mix application, and the documentation trail that disclosure frameworks like CDP and ESRS now expect. Courses run self-paced online or as instructor-led corporate workshops, with CPD credit built in for professionals maintaining existing credentials.
If your next reporting cycle needs a defensible dual Scope 2 figure, visit the accreditation page to review current course tracks and enrollment dates.