News and insights Blog A step-by-step guide to Scope 2 emissions accounting

A step-by-step guide to Scope 2 emissions accounting

Tips and tricks to make your life easier when calculating emissions from electricity, steam, heat, and cooling.

Written by Alex Ruelas
Published on 30 October 2024
Written by Alex Ruelas
Published on 10 October 2024

Scope 2 emissions are an essential part of most organisation’s carbon footprint. They comprise the indirect emissions associated with electricity consumption and other sources of purchased energy. And although they are often regarded as the most straightforward to reduce, one must understand the different accounting methods and the tools available to abate them.

In this article, we explore the practical side of managing Scope 2 emissions, along with some tips and tricks to make your decarbonisation efforts easier from the start.

What are Scope 2 emissions?

Scope 2 covers the indirect greenhouse gas (GHG) emissions that arise from the consumption of purchased electricity, steam, heat, or cooling. These GHG contributions occur at the facility that generates the energy, not at the facility consuming it. However, the Scope 2 emissions are attributed to the end user.

The Greenhouse Gas Protocol (GHG-P) Scope 2 Guidance establishes a framework for how organisations should measure and report these emissions. It also puts forward two different but complementary accounting methods:

  • Location-based method: Reflects the average emissions intensity of the grid where energy consumption occurs.
  • Market-based method: Accounts for emissions based on contractual instruments for electricity consumption. This includes unbundled Energy Attribute Certificates (EACs) and those from Power Purchase Agreements (PPAs), as well as green tariffs.

While each method requires different inputs and documentation, corporate sustainability standards require companies to employ both to achieve comprehensive emissions accounting.

Below, you will find a step-by-step guide that includes market-based and location-based accounting. We will focus on electricity to get you started. However, keep in mind that the exercise should be repeated for each source of emissions.

1. Collect your electricity consumption data 

All Scope 2 emissions accounting efforts start by quantifying your consumption. Electricity usage data should be easily accessible and is typically sourced from power bills and utility contracts.

Ensure that you have data categorised per country or facility to simplify your calculations later. This is essential as the emissions intensity of electricity generation varies by region. In some countries, the grid relies on fossil fuels, while others have a much higher share of renewables.

Market-based instruments are also linked to location. Even in regions like Europe, where there is a common EAC system and certificates can be transferred across national borders, each country has its own registry. 

2. Find a good dataset for national grid emission factors (EFs)

To calculate your location-based Scope 2 emissions, you'll need emission factors (EFs). These measure the carbon intensity of a given grid, typically within a country, and express the amount of GHGs emitted per unit of electricity consumed (usually in kg CO₂e/kWh).

Sources for EFs include:

  • The International Energy Agency (IEA)
  • The Association of Issuing Bodies (AIB) for Europe
  • The U.S. Environmental Protection Agency (EPA) for U.S. data
  • Local government or national reports

Make sure the EFs cover the most recent year of data available. If your company operates in multiple countries, you will need as many EFs. You can create a centralised database of grid emission factors for efficiency.

This is an example of emission factors and energy source breakdown from two countries, Norway and Germany, based on national grid mixes and residual mixes for 2023 (read more on residual mixes in step 5).

Country

Type

Emission factor (kgCO2e/kWh)

Fossil energy share

Nuclear energy share

Renewable energy share

Norway

Grid (location-based)

0.0167

1%

0%

99%

Norway

Residual (market-based)

0.5986

86%

11%

0%

Germany

Grid (location-based)

0.3425

46%

2%

52%

Germany

Residual (market-based)

0.7199

97%

3%

0%

 

This information was taken from the Tanso Emission Factor Database, which includes yearly updated global electricity coverage and provides access to emission factors for all national grid mixes (location-based) and available residual mixes (market-based) compliant with both the GHG-P and CSRD / ESRS requirements.

Bra Miljoval-1

3. Calculate your location-based emissions

Once you have collected both your consumption data and EFs, you can calculate your location-based Scope 2 emissions. The calculation is simple: multiply the electricity consumption by the emissions factors. For example, if you consumed 1,000,000 kWh of electricity in a region with a grid emission factor of 0.4 kg CO₂e/kWh, the total emissions for that location would be 400,000 kg CO₂e.

Make sure to consistently group your energy consumption by region. The vast majority of companies do this by country. This is important because, as mentioned earlier, the emissions intensity of electricity generation varies greatly depending on the mix of energy sources (e.g., fossil fuels, nuclear, renewables) in each location’s grid. Lastly, sum the emissions of every region to get your location-based total.

4. Collect information on renewable electricity purchases

The market-based approach reflects the emissions of an organisation’s chosen source of energy, whether fossil or renewable. It relies on contractual instruments to track clean electricity consumption and to assign ownership of its environmental benefits, mainly reduced emissions.

To make valid claims of renewable energy use, companies must document all clean energy purchases with Energy Attribute Certificates (EACs), and always remember to check that the EACs you purchase are on the list of accepted certificates by the CDP. These include Guarantees of Origin (GOs) in the EU, Renewable Energy Certificates (RECs) in the US and Canada, and International RECs in a growing number of countries.

 Having said that, there are several ways to source properly documented renewables:

  • Unbundled Energy Attribute Certificates (EACs): Companies can purchase electricity and EACs separately and from different providers. When purchasing unbundled EACs, consumers buy a volume of certificates that is equivalent to their physical electricity consumption.
  • Power Purchase Agreements (PPAs): These are long-term contracts with renewable energy producers for buying electricity at a fixed price. For renewable energy claims to be valid, companies must document their consumption from PPAs with EACs.
  • Supplier-specific emission factors: Some energy suppliers provide specific EFs that reflect their energy mix, particularly if they offer green tariffs. Green tariffs should be backed by an EAC to avoid double counting. In the EU, this is required by law.

Contractual instruments are increasingly relevant for companies’ voluntary and mandatory reports. For example, the European Sustainability Reporting Standards (ESRS) mandate the use of contractual instruments to prove the consumption of renewables under the Corporate Sustainability Reporting Directive (CSRD).image-1 (1)

5. Calculate market-based emissions

In simple terms, the calculation of market-based emissions considers zero emissions for documented renewables and uses what is called the residual mix for the energy sourced from the grid. 

The residual mix is the electricity left in the grid when all contractual instruments are subtracted, or in other words, the total energy mix in the grid minus any renewable energy already claimed by other users. This calculation is crucial for organisations to avoid double counting energy attributes.

Residual mixes are available for all countries or grids with a market-based energy tracking system. For the EU, the Association of Issuing Bodies (AIB) provides data on the residual mix per country.

6. Heat, cooling, and steam

Companies that purchase heat, cooling, or steam from an external provider should repeat the above steps using appropriate emission factors for each energy type. These are often less precise than electricity emission factors, but generic values are sufficient. 

Common sources of emission factors include:

  • Government publications
  • Industry reports
  • Environmental agencies

Managing Scope 2 emissions is essential for any company with climate goals. By collecting comprehensive data, applying both accounting methods, and ensuring renewable energy purchases are properly accounted for, businesses can not only track their GHG emissions but also make informed decisions to reduce them.

How can Ecohz help?

Ecohz simplifies the path to net zero. For over 20 years, we have helped businesses decarbonise their Scope 2 and switch to clean energy. From creating renewable energy strategies to streamlining the procurement of EACs worldwide, our team tailors innovative solutions for every client based on scale, location, sector and all the variables that make each business unique.

Do you want to learn more about ecolabelled electricity? Let’s have a chat.

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