Scope 2 Market-Based vs Location-Based: Which to Report and Why
Scope 2 Market-Based vs Location-Based: Which One Do You Use?
When you open a sustainability questionnaire and reach the Scope 2 electricity section, you often see two fields: location-based and market-based. Most SMEs have no idea which number to enter, or why there are two. This guide explains both methods clearly and tells you what to do in practice.
What Is Location-Based Scope 2?
The location-based method uses the average carbon intensity of the electricity grid in your country or region. It reflects the actual mix of power stations — coal, gas, nuclear, wind — that generate electricity in your area.
Examples of location-based grid factors (DEFRA 2023 / IEA 2022):
| Country | Location-based factor |
|---|---|
| --------- | ----------------------- |
| UK | 0.193 kgCO2e/kWh |
| Germany | 0.380 kgCO2e/kWh |
| France | 0.052 kgCO2e/kWh |
| Netherlands | 0.270 kgCO2e/kWh |
| Poland | 0.773 kgCO2e/kWh |
If your office in Manchester uses 50,000 kWh/year, your location-based Scope 2 is: 50,000 x 0.193 = 9.65 tCO2e.
What Is Market-Based Scope 2?
The market-based method uses the emission factor of the specific electricity contract you have chosen. If you buy renewable electricity through a Power Purchase Agreement (PPA), Renewable Energy Certificates (RECs), or a certified green tariff, the market-based factor can be zero (or near-zero).
The idea: if you have specifically contracted renewable electricity, you can claim a lower emission factor than the average grid.
Which Should You Report?
The GHG Protocol Scope 2 Guidance (2015) requires companies to report both methods if they use the market-based approach. You cannot report only market-based.
In practice:
Report location-based if: you have a standard electricity contract with no green tariff or renewable certificates. This is the case for most SMEs.
Report both if: you have a certified green tariff, a PPA, or have purchased RECs. Your market-based number will be lower (possibly zero), but you must also disclose the location-based figure.
What Counts as a Valid Market-Based Instrument?
Not all "green tariffs" qualify. For a market-based factor of zero, you need:
- A certified renewable electricity contract with unbundled Renewable Energy Guarantees of Origin (REGOs in the UK, GOs in the EU)
- A direct Power Purchase Agreement with a renewable generator
- Verified Renewable Energy Certificates that match your consumption year and country
A "green tariff" from your energy supplier that is not backed by verified certificates does not reduce your market-based Scope 2 to zero. Check whether your tariff includes REGOs or GOs.
For SME Questionnaire Responses: Keep It Simple
If you are an SME without a green tariff, report the location-based figure only and note "market-based not applicable — standard grid contract." This is a complete, correct response.
If you have a certified green tariff, report both: location-based (using country grid factor) and market-based (using your certificate-backed factor, likely zero). Include the certificate type (REGO, GO) and issuing body in your response.
DeCarbonOPS calculates Scope 2 using the location-based method with country-specific DEFRA grid factors. If you have renewable certificates, you can note this in your questionnaire response alongside the location-based figure that DeCarbonOPS provides.
Frequently Asked Questions
Which Scope 2 method should I use if I have a green energy tariff?
If you have a certified green tariff backed by Renewable Energy Guarantees of Origin (REGOs in the UK or GOs in the EU), use both methods: report the location-based figure using your country's grid factor, and the market-based figure using your contracted factor (typically zero or near-zero). The GHG Protocol Scope 2 Guidance requires both to be disclosed when market-based is used — you cannot report only the market-based figure.
Does a '100% renewable' label from my energy supplier mean zero market-based emissions?
Not necessarily. The label must be backed by verified certificates (REGOs or GOs) that match your consumption year and geography. A green tariff without unbundled certificates does not qualify for a zero market-based factor under the GHG Protocol. Ask your supplier: 'Do you provide unbundled REGOs or GOs with this tariff? Which country are they from and what generation year do they cover?'
What if a questionnaire only asks for one Scope 2 figure — which do I give?
If the questionnaire asks for a single Scope 2 figure without specifying the method, report the location-based figure and note the method used in the comments. Location-based is the more conservative and more commonly expected figure for questionnaire responses unless the form explicitly requests market-based. If you have renewable certificates, mention them in your notes.
Are solar panels I own treated as market-based or location-based?
Electricity generated by solar panels you own and consume on-site is excluded from Scope 2 entirely under both methods — it is self-generated, not purchased. It reduces your gross electricity consumption figure. Report net purchased electricity (total kWh consumed minus solar generation). Note your solar generation as a positive action in the comments.
Is the market-based or location-based figure used for CSRD compliance?
CSRD (ESRS E1) requires disclosure of both location-based and market-based Scope 2 emissions. For SME supplier questionnaire responses that feed into a large company's Scope 3 calculation, the buyer's methodology typically specifies which to use. If unspecified, provide the location-based figure as the primary number.
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