When calculating your organisation’s energy usage and CO₂ footprint, electricity consumption plays a significant role. These emissions fall under Scope 2, which includes indirect emissions related to the use of electricity, steam, heat, and cooling. There are two common methods for calculating these emissions: the location-based and market-based method.
Location-based emissions
These are emissions based on the average energy mix of the region where your organisation operates.
The CO₂ emissions associated with your electricity use depend on the types of power sources available in your area.
For example, if your organisation is located in a region that relies heavily on fossil fuels, the location-based emission factor will be high, even if you have a contract for green electricity.
Market-based emissions
These emissions are calculated based on the specific energy purchasing choices made by your organisation. This method treats the electricity market as a mass-balance system.
If you have a contract for 100% renewable electricity (such as wind or solar energy), you are allowed to report this as 0 kg CO₂eq/kWh, even if your region mostly relies on fossil fuels.
Which Method Should You Use?
To get the most accurate and transparent picture, the GHG Protocol requires organisations to report both market-based and location-based emissions. This provides the most complete insight into your emissions and how you can reduce them.
However, the CO₂ Performance Ladder 4.0 requires the use of market-based emission factors by default, and in some cases, it explicitly asks for a location-based calculation as well. This is also how it is implemented in SmartTrackers. If not explicitly stated, SmartTrackers uses market-based emission factors by default.
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