Mastering Scope 2 emissions: 6 Steps for accurate accounting

Scope 2 emissions are an essential part of mostorganisation’s carbon footprint and decarbonizationstrategy. They comprise the indirect emissions associated withelectricity consumption and other sources of purchased energy. And althoughthey are often regarded as the most straightforward to reduce, one mustunderstand the different accounting methods and the tools available to abatethem.

In this article, we explore the practicalside of managing Scope 2 emissions, along with some tips and tricks to makeyour 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 thatgenerates 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 andreport these emissions.

It also puts forward two different but complementary accounting methods:

• Location-based method: Reflects theaverage emissions intensity of the grid where energy consumption occurs.
• Market-based method: Measures 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 it's own registry.

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

To calculate your location-based Scope 2emissions, you'll need emission factors (EFs). These measure the carbonintensity 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 emissionfactors for efficiency. 

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 ofelectricity 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 fromdifferent providers. When purchasing unbundled EACs, consumers buy a volume ofcertificates that is equivalent to their physical electricity consumption.
• Power Purchase Agreements (PPAs):
  These are long-term contracts with renewable energy producers for buying electricityat a fixed price. For renewable energy claims to be valid, companies mustdocument 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).

5. Calculate market-based emissions

If your electricity supplier provides you with an emission factor for you electricity contract with the required proof, then this is used to calculate the market-based emissions. Otherwise, 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 byother users. This calculation is crucial for organisations to avoid doublecounting energy attributes. Residual mixes are available for all countries or grids with a market-based energy tracking system, such as all EU countries. For the EU, the Association of Issuing Bodies (AIB) provides data onthe 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 and Tanso 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.

Tanso accelerates the decarbonization of the industry. We offer sustainability software for ISO-certified carbon accounting and AI-supported CSRD reporting tailored to the manufacturing industry. Our customers save cost from automated data collection and reporting and profit from extensive analytics enabling a data-driven approach to corporate sustainability. The Tanso platform combines deep expertise in corporate and product carbon footprint calculations with full coverage of regulations such as CSRD, CBAM and EU Taxonomy, realizing the synergies in an all-in-one solution.