# Scope 2: location-based and market-based methods

> How to calculate Scope 2 with the two methods of the GHG Protocol Scope 2 Guidance (2015), location-based and market-based: how they differ, what data you need, a worked example and the standard's revision.

Source: https://7g.carbonplatform.asia/en/kb/scope-2-methods

The GHG Protocol Scope 2 Guidance (2015) requires emissions from purchased energy to be calculated with two methods. The location-based method uses the average emission factor of the grid where you consume the electricity. The market-based method reflects your choice of supplier and contracts: direct contracts, energy attribute certificates and the residual mix. Companies that have such contractual instruments report both results.

## Location-based method

The location-based method shows the average emissions of the grid your facility is connected to, regardless of any purchase contracts.

**Emissions = grid consumption × average grid emission factor.**

The method is simple and relies on data every company has: meter readings and invoices. It reflects the physical reality of the grid well, but it does not change if you sign contracts for “green” energy.

## Market-based method

The market-based method takes into account the contractual instruments under which a company buys energy with specific attributes. Emission factors are taken from a hierarchy of sources, from the most specific to the least:

1. energy attributes backed by energy attribute certificates;
2. direct contracts with a generator (PPAs);
3. a supplier-specific emission factor;
4. the residual mix, that is, the average grid factor after the claimed “green” volumes are removed;
5. if no residual mix is available, the average grid emission factor.

The instruments must meet quality criteria: they must come from the same market, match the period of consumption and be retired only once.

## Example: one facility, two methods

A facility consumed 1,000,000 kWh in a year. In this worked example, we use an average grid emission factor of 0.726 kg CO₂e/kWh. The company bought 300,000 kWh under a contract with a solar plant, with verified attributes (0 kg CO₂e/kWh); for the remaining volume we apply the same grid factor, because no residual mix is available.

| Method | Calculation | Scope 2 |
|---|---|---|
| Location-based | 1,000,000 × 0.726 | 726 t CO₂e |
| Market-based | 300,000 × 0 + 700,000 × 0.726 | 508.2 t CO₂e |

If a residual mix had been published for the grid, its factor would be higher than the average, and the market-based result would come out somewhat higher.

## On-site generation

Electricity from your own solar plant that is consumed on site is not part of Scope 2 at all: it simply reduces what you buy from the grid and lowers the result under both methods. See [Solar plants and energy storage](https://7g.carbonplatform.asia/en/kb/solar-and-storage) for details. If your own generation runs on gas, however, its emissions belong to Scope 1.

## Revision of the Scope 2 Guidance

The GHG Protocol is revising its standards. Consolidated Scope 2 text was expected by mid-2026, and the full updated Corporate Standard package by the end of 2027. The new market-based requirements under discussion, hourly and geographic matching of consumption with “green” attributes, are being phased in and mainly affect voluntary claims about “clean” energy. Follow the current status in the [regulatory map](https://7g.carbonplatform.asia/en/kb/documents).

## How it works in the platform

Scope 2 is entered on the [Data entry](https://7g.carbonplatform.asia/data-entry) screen: purchased electricity and heat by connection and meter, contractual energy allocations separately, and the output of your own solar plant month by month. The platform calculates both results and labels them “Location-based” and “Market-based”. In [company GHG analytics](https://7g.carbonplatform.asia/ghg), the Scope 2 card shows the location-based result, and the annual company report uses the location-based method as its Scope 2 basis by default. Emission factors come from the platform's reference catalog, and every record shows the methodology applied; for how values are chosen, see [Emission factors](https://7g.carbonplatform.asia/en/kb/emission-factors).

## Frequently asked questions

### Do we have to report both methods?

Under the Scope 2 Guidance, companies operating in markets with contractual instruments report both results. Where no such instruments exist, the market-based result effectively matches the location-based one or relies on the average grid factor.

### Can we claim zero Scope 2 by buying certificates?

Under the market-based method, verified attributes reduce the result, but the location-based result stays the same and is reported as well. Claims about “clean” energy must be backed by high-quality instruments, and the requirements for them are being tightened as the standard is revised.

### Which method should we use for reduction targets?

You can set a target under either method, but you need to state which one you use and apply it consistently, including to the base year.