What is Scope 2 Emissions?

What is Scope 2 Emissions?

Scope 2 emissions are indirect greenhouse gas emissions from the generation of purchased electricity, steam, heating, and cooling consumed by an organization. As defined by the GHG Protocol Scope 2 Guidance (2015), these emissions physically occur at the facility where energy is generated but are attributed to the organization that purchases and consumes that energy. Scope 2 typically represents 20-40% of a service-sector company's total footprint.

Why It Matters

Scope 2 emissions connect individual organizations to the broader energy system. Every kilowatt-hour of grid electricity carries an emissions burden determined by the generation mix—coal, gas, nuclear, renewables—of the local grid. Organizations that rely heavily on fossil-fuel-intensive grids inherit substantial indirect emissions, even if their own operations are otherwise clean.

The strategic importance of Scope 2 lies in the readily available abatement options. Unlike Scope 1 process emissions or Scope 3 value chain complexity, Scope 2 reductions can be achieved through energy efficiency, on-site renewable generation, power purchase agreements (PPAs), and renewable energy certificates (RECs). Many organizations achieve their first significant emissions reductions through Scope 2 interventions.

The dual reporting requirement adds complexity. The GHG Protocol mandates that organizations report Scope 2 using both location-based (grid average) and market-based (reflecting contractual instruments) methods. The market-based approach allows organizations that purchase renewable energy to report lower Scope 2 emissions, while the location-based approach reflects the physical reality of the grid they draw from.

Regulators and rating agencies increasingly scrutinize the quality of market-based claims. Purchasing unbundled RECs from existing renewable facilities in different markets offers less additionality than signing a long-term PPA that finances new renewable capacity. The 24/7 Carbon-Free Energy initiative, championed by Google and others, pushes the frontier further by matching renewable supply to consumption on an hourly basis.

How It Works / Key Components

Scope 2 accounting starts with energy consumption data—electricity bills, meter readings, and utility records. The location-based method applies grid-average emissions factors published by agencies like the IEA, EPA (eGRID), or national equivalents. This calculation reflects the average carbon intensity of the grid serving each facility.

The market-based method applies emissions factors from contractual instruments: energy attribute certificates (RECs, GOs), direct contracts with generators (PPAs), or utility-specific emissions rates. When no contractual instrument exists, a residual mix factor—the grid average minus all tracked renewable claims—is applied. This prevents double-counting of renewable energy attributes.

Reduction strategies span a spectrum of cost and impact. Energy efficiency measures (LED lighting, building management systems, efficient equipment) reduce total consumption. On-site solar and other distributed generation eliminate Scope 2 for the energy they produce. Virtual and physical PPAs contract for off-site renewable energy, often with terms of 10-20 years. RECs provide the most accessible entry point but face scrutiny on additionality.

For multinational organizations, Scope 2 management requires navigating different grid intensities, renewable energy markets, and regulatory frameworks across jurisdictions. A data center in Norway (near-zero grid intensity) presents fundamentally different Scope 2 challenges than one in Poland (coal-heavy grid), driving location-sensitive energy procurement strategies.

Council Fire's Approach

Council Fire helps organizations develop Scope 2 strategies that balance emissions impact, financial returns, and credibility. We evaluate energy procurement options across jurisdictions, structure PPAs that deliver additionality, and build reporting systems that satisfy both location-based and market-based disclosure requirements under evolving standards.

Frequently Asked Questions

What is the difference between location-based and market-based Scope 2?

Location-based uses the average grid emissions factor where you consume electricity—reflecting physical reality. Market-based uses the emissions factor of the specific energy you've contracted—reflecting your procurement choices. Both must be reported under the GHG Protocol.

Do renewable energy certificates (RECs) eliminate Scope 2 emissions?

Under market-based accounting, RECs can reduce reported Scope 2 to zero. However, critics note that cheap unbundled RECs may not drive additional renewable energy deployment. Stakeholders increasingly expect higher-quality instruments like PPAs that demonstrate additionality.

Why is Scope 2 often easier to address than Scope 1 or 3?

Scope 2 benefits from mature market mechanisms—renewable energy markets, PPAs, RECs—and doesn't require changing physical operations (Scope 1) or influencing external value chain partners (Scope 3). Energy procurement decisions are within the direct authority of most organizations.