Location Vs Market-Based Carbon Reporting

If you’re looking to calculate your electricity emissions you may have come across the terms location and market-based carbon reporting. But what does it actually mean and what is the difference?

What’s the difference between market and location-based?

There are two methods of reporting the emissions related to electricity consumption, these are called location and market-based reporting which are defined via the Greenhouse Gas Protocol.

💡 The location-based method reveals what the company is physically putting into the air, and the market-based approach shows emissions the company is responsible for through its purchasing decisions, such as a renewable energy contract.

The location-based or place-based method calculates the emissions from electricity use based on the average emission intensity of the power grid you’re using.

For example, if your company operates in the UK, you will be using the UK grid emission factor published by DEFRA. The grid emission factor will depend on the sources used to generate energy. If you’re interested, you can see a live view of the UK grid emissions here.

A market-based method calculates the emissions from the electricity you and your company purchase. The market-based method is intended to support the use and reporting of green energy tariffs via Renewable Energy Certificates (REC) and Guarantees of Origin (REGO).

Why does this matter? For most companies, especially SMEs, it’s not always possible to put solar on your roof or directly produce renewable energy, however, it’s fairly simple to shift towards a renewable energy tariff. This market-based approach rewards companies for making better environmental decisions.

💡 Importantly, companies are required to report their emissions under both methods.

Calculating Market and Location-Based Emissions

Let’s look at the impact of electricity with the example of a company using a REGO or REC. Under market-based reporting, the scope 2 emissions from purchased electricity would be zero but under location-based reporting the emissions would be the same as a company without a REGO or REC.

First, we’ll need to know which country you’re located in as each country has a different grid emission factor. To calculate emissions, you simply enter your energy usage and multiply it by the relevant emission factor. This is all taken care of in Zevero when as you enter your facility location.

Location-Based

Let’s start with location-based emissions. This is the same whether a company has or does not have a “green tariff”.

🔥 Let’s say my company consumed 100,000 kWh of electricity in the UK, which has a grid emission factor of 0.21233 kgCO2e/kWh for scope 2.

My electricity emissions would be:
100,000 kWh x 0.21233 kgCO2e/kWh = 21,233 kgCO2e or 21.23 tCO2e.

Market-Based

Market-based is a little trickier, it requires you to either know your contract emission factor or whether it is 100% renewable. We’ll help you understand this by looking at your bills.

Next, we’ll take the emission factor for your contract and multiply this by your usage. Let’s look at the above formula with market-based reporting instead.

If the energy provider does not provide an emission factor, we use something called the “residual mix factor”. This is an emission factor for the unclaimed energy and will be higher than the location-based grid average due to all the savings from RECs being taken out of the calculation.

🔥 Company with a REC

‍Again, my company consumed 100,000 kWh of electricity during the reporting period, however this time, I have 100% renewable energy, so my emission factor would be 0 kgCO2e/kWh.

My scope 2 emissions would be:

100,000 kWh x 0 kgCO2e/kWh = 0 kgCO2e.

Company without a REC (in UK)

In this case, the residual fuel mix factor would be used which is 0.316kgCO2e/kWh.

My scope 2 emissions would be:

100,000 kWh x 0.316 kgCO2e/kWh = 31,600 kgCO2e or 31.60 tCO2e.

That’s it, we’ve calculated the difference between market and location-based emissions.

It all seems a little confusing, but it really doesn’t need to be. At Zevero we can help with the whole process of calculating your scope 1, 2 and 3 emissions, no matter how complicated your energy tariffs are!

‍