Scope 2: Location-Based vs Market-Based

What they mean, when to use them, and how to talk about claims safely

Carbon BasicsGuide10 min

Note: This is educational guidance, not legal advice.

What you'll accomplish

  • Understand location-based vs market-based Scope 2 in plain English
  • Know why many organizations report both
  • Avoid common mistakes around "renewable" claims
  • Create a simple "instrument inventory" so market-based isn't hand-wavy
  • Have a copy/paste disclosure checklist

Who this is for

Sustainability teams

Responsible for disclosures

Finance/leadership teams

Approving public claims

Anyone

Confused by RECs/green tariffs/renewable claims

When to use this

Use this when:

  • •You're preparing Scope 2 reporting for the first time
  • •Leadership wants to claim "100% renewable"
  • •You have RECs or green tariffs and need to understand disclosure expectations
  • •You need a clean internal method memo

Prerequisites

Scope 2 Utility Data Pipeline Starter Kit (you need kWh first)

Quick start (10 minutes)

  • Confirm you have kWh + billing periods + evidence links
  • Decide reporting posture:
    • • Always compute location-based
    • • Compute market-based only if you can list instruments
  • Start an instrument inventory (Template 1)

Plain-English definitions

LB

Location-based

Scope 2 emissions calculated using the average grid emissions where you consume electricity.

What it represents: The grid reality at the location.

MB

Market-based

Scope 2 emissions calculated using the contractual instruments you buy (where applicable).

What it represents: Your procurement choices (when defensible and documented).

Beginner rule: Location-based is mandatory for reality-checking. Market-based requires documentation.

Why organizations report both

Reporting both:

  • Shows the grid reality (LB)
  • Shows procurement choices (MB)
  • Reduces confusion when claims are made

If you publish only MB without transparency, you create credibility risk.

What "renewable" claims require (plain English)

If you claim:

  • • "100% renewable electricity"
  • • "Net-zero electricity"
  • • "Zero-emissions electricity"

…you need to be able to explain:

  • •What instruments you used
  • •What period they cover
  • •What geographies they apply to
  • •Whether they match your consumption (kWh) and timing

Beginner rule: If you can't audit your claim internally, don't publish it externally.

Common pitfalls

  • ✗Using market-based claims without an inventory of instruments
  • ✗Mixing years (instruments for 2024 used to claim 2025)
  • ✗Claiming renewable for a portfolio when only part is covered
  • ✗Confusing "green power program" marketing with auditable instruments
  • ✗Not documenting assumptions and boundaries

Templates included

Template 1 — Instrument Inventory (copy/paste table)

| Site/Region | Period | Consumption (kWh) | Instrument type | Provider | Quantity (kWh) | Evidence link | Notes/limitations |
|---|---|---:|---|---|---:|---|---|

Instrument types (examples):

  • • Utility green tariff
  • • Renewable energy certificates (RECs)
  • • Power purchase agreement (PPA)
  • • Other contractual instruments (document clearly)

Template 2 — Scope 2 Methods Memo (copy/paste)

Scope 2 Method Summary (Internal)

We calculate Scope 2 emissions using:
1) Location-based method, based on average grid emissions factors for the region of consumption.
2) Market-based method only where supported by documented contractual instruments.

Minimum data required:
- kWh consumption by billing period and site
- Evidence links (bills/exports)
- Instrument inventory (type, quantity, period coverage, evidence)

Disclosures:
- We will not claim renewable coverage beyond the quantity and period supported by our inventory.
- Where data is missing, we disclose estimates and limitations.

Template 3 — Claim safety checklist (copy/paste)

Scope 2 Claim Checklist

Before any public claim:
- We have location-based numbers (yes/no)
- We have a complete instrument inventory (yes/no)
- Instruments match the reporting year (yes/no)
- Instruments cover the claimed scope (portfolio vs subset) (yes/no)
- Evidence links are stored and accessible (yes/no)
- Limitations are disclosed (yes/no)

How to prove impact

Reproducibility

You can reproduce numbers from raw kWh + instruments

Consistency

Claims are consistent across years and survive scrutiny

Clarity

Reduced internal debate and confusion

Evidence and Confidence

Confidence:Medium-High(concepts are stable; implementation details vary by instrument and jurisdiction)

Assumptions: You can inventory procurement instruments.

Where this can fail: Overclaiming or mixing periods/geographies.

Change log

v1.0 (2026-01): Latest release