Scope 2 emissions are the indirect greenhouse gas emissions from the generation of electricity, steam, heating and cooling that a company purchases and consumes. They are indirect because the emissions occur at the power plant, not at the company's site — but the company is responsible because it drives the demand.
The two reporting methods
The GHG Protocol Scope 2 Guidance requires dual reporting:
- Location-based — uses the average emissions intensity of the grid where the electricity is consumed. Reflects physical reality.
- Market-based — reflects the emissions of the electricity the company has chosen to buy, via contracts such as PPAs, green tariffs and unbundled Guarantees of Origin.
The difference matters. A company on a green tariff might report:
- Location-based: 4,500 tCO₂e (Polish grid average)
- Market-based: 0 tCO₂e (100% renewable contract)
Both must be disclosed under ESRS E1, ISSB IFRS S2 and CDP.
How to measure Scope 2
Location-based: consumption (MWh) × grid emission factor (kgCO₂e/MWh, from IEA or national TSO).
Market-based: apply, in order:
- Direct contract emission factors (PPA-specific).
- Supplier-specific emission factors (from utility disclosures).
- Residual mix emission factors (AIB for Europe).
- Grid average as fallback.
The credible market-based ladder
Not all "green electricity" claims are equal. Ranked from most to least credible:
- On-site renewables — genuinely displaces demand.
- Physical PPA — long-term contract with a specific new generator.
- Virtual PPA — financial contract supporting a specific new generator.
- Green tariff backed by unbundled Guarantees of Origin — least additional; depends on the market.
The Science Based Targets initiative expects additionality — new generation, not repackaging of existing renewables.
How to reduce Scope 2
- Reduce demand first. Energy efficiency is cheaper than any procurement contract. Building controls, LED, motors, VSDs, compressed air, HVAC.
- Electrify. Move heat from gas to heat pumps — this shifts Scope 1 to Scope 2, which is easier to decarbonise.
- Procure renewables. In order of credibility: on-site → PPA → green tariff.
- Storage and flexibility. Match generation and consumption profiles, especially where 24/7 carbon-free energy is the goal.
Reporting requirements
Scope 2 dual reporting is required under CSRD/ESRS E1, ISSB IFRS S2, SEC climate rules and the SBTi. Financial institutions must include Scope 2 in PCAF financed emissions calculations.
Related reading: Scope 1 emissions explained and Scope 3 emissions explained.
Frequently asked questions
Are Guarantees of Origin enough for a market-based zero claim?+
Formally yes under the GHG Protocol, but SBTi, RE100 and increasingly ESRS reviewers expect additionality. Unbundled GOs from existing hydro have limited credibility.
How does 24/7 carbon-free energy differ?+
24/7 CFE matches consumption with carbon-free generation on an hourly basis in the same grid region. It goes further than annual matching and better reflects real grid impact.
Is district heating Scope 2?+
Yes. Purchased heat and steam are Scope 2 and follow the same dual-reporting methodology as electricity.
This article follows Redigo Carbon's editorial standards: factual claims reference recognised frameworks — GHG Protocol, CSRD, ESRS, the Sustainability-Linked Loan Principles, the Green Loan Principles — and Redigo's opinions are labelled as such.
What this article is based on.
- GHG Protocol — Corporate Accounting and Reporting Standard — GHG Protocol
- GHG Protocol — Scope 2 Guidance — GHG Protocol
- GHG Protocol — Corporate Value Chain (Scope 3) Standard — GHG Protocol
- ISO 14064-1 — Corporate greenhouse gas inventories — ISO
- IPMVP — International Performance Measurement and Verification Protocol — EVO
- IEA — World Energy Outlook & sectoral net-zero scenarios — International Energy Agency
Redigo Carbon distinguishes between regulatory requirements, industry standards, best practice and Redigo's own recommendations. See our editorial standards for how we research, cite and update this content.
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