Location-based vs market-based Scope 2: methods, RECs and the 2026 revision
Location-based vs market-based Scope 2 is the difference between where your electricity comes from physically and what you have bought contractually. The location-based method applies the average emission factor of the grid you draw from; the market-based method applies the emission factors of the contracts and certificates you hold, such as RECs, I-RECs, Guarantees of Origin or power purchase agreements. The GHG Protocol Scope 2 Guidance asks most companies to report both figures.
Location-based vs market-based Scope 2: why two methods
Electricity on a grid is mixed: once it is on the wires, a kWh from a solar farm cannot be told apart from one from a coal plant. Yet companies buy electricity in different ways — standard tariffs, green tariffs, direct contracts with generators, or separate certificates. The GHG Protocol's 2015 Scope 2 Guidance resolved this with two methods that answer different questions:
- Location-based: what emissions does my consumption cause on the grids where I operate?
- Market-based: what emissions are associated with the electricity I have chosen to buy?
Companies with operations in markets where contractual instruments are available must report both — known as dual reporting. Where no such instruments exist, the market-based figure falls back to grid data and will usually equal the location-based one.
The location-based method
Multiply electricity consumed (kWh) by a grid-average emission factor for the location and period. The Scope 2 Guidance prefers the most geographically precise factor available: a regional or sub-national grid factor before a national average. In India, for example, companies commonly use the national grid emission factor published by the Central Electricity Authority; elsewhere, national inventories, utility data or international databases are used. See our emission factors guide.
Purchasing choices do not change a location-based result. It falls only when you use less electricity, generate your own renewable power on site, or the grid itself gets cleaner.
The market-based method
The market-based method applies emission factors from contractual instruments, in order of precedence:
- Energy attribute certificates — RECs, I-RECs, Guarantees of Origin and similar certificates, each typically representing 1 MWh.
- Direct contracts — such as power purchase agreements with a generator, where certificates are conveyed with the power or none exist.
- Supplier-specific emission rates — a utility's disclosed rate or a specific green tariff.
- Residual mix — the grid factor after certificates claimed by others are removed.
- Grid average — only where no residual mix is available, with a disclosure that double counting may occur.
To be used, instruments must meet the Scope 2 Quality Criteria. In short, they must convey the emission rate of the generation, be the only claim on that energy, be retired or cancelled for the reporting company, relate to a period close to the consumption, and come from the same market in which the consumption occurs.
Certificates: RECs, I-RECs and Guarantees of Origin
| Instrument | Where used | Notes |
|---|---|---|
| RECs (Renewable Energy Certificates) | United States, Canada | Tracked in regional registries |
| Guarantees of Origin (GOs) | European Union and EEA | Issued under EU rules; REGOs are the UK equivalent |
| I-RECs | Many countries in Asia, the Middle East, Africa and Latin America, including India, the UAE and Singapore | Issued by local accredited issuers under an international standard |
| National certificate schemes | Various | Check whether they meet the Scope 2 Quality Criteria before relying on them |
The key test is that a certificate is cancelled in your name for consumption in the same market. Buying certificates from a different country or grid region generally does not meet the criteria.
Illustrative comparison
A company uses 1,000 MWh of grid electricity. All factors below are illustrative.
| Scenario | Location-based | Market-based |
|---|---|---|
| No instruments; grid average 0.70 tCO2e/MWh, residual mix 0.75 | 700 t | 750 t |
| 600 I-RECs from the same grid, cancelled for the company | 700 t | 400 × 0.75 = 300 t |
| Power purchase agreement covering all consumption, with certificates | 700 t | 0 t |
The market-based figure can be higher than the location-based one without instruments, because the residual mix excludes renewable power claimed by others. The location-based figure stays at 700 t in every scenario.
Scope 2 Guidance revision: status in 2026
The GHG Protocol is revising its Scope 2 Guidance. A public consultation ran from 20 October 2025 to 31 January 2026 and drew close to 1,100 responses. The main proposals were:
- Market-based: hourly matching of certificates to consumption for larger organisations, a deliverability requirement (instruments must come from a grid region that can physically serve the load), an updated residual mix definition and a fossil-based fallback factor where no residual mix exists.
- Location-based: a hierarchy of emission factors ranked by precision, requiring the most precise factor that is freely and publicly available.
- Dual reporting retained.
Feedback was divided, with low support from many companies for hourly matching and deliverability. In 2026 the Independent Standards Board asked the technical working group to develop two market-based methods: one adding hourly matching, deliverability and incrementality, and one keeping the 2015 requirements for a transition period, with disclosure of the method used. As of October 2026 these details — including any cut-off date — are still being worked out. The GHG Protocol currently expects a consolidated public consultation in 2027 and a joint GHG Protocol–ISO corporate standard in late 2028.
Until a revised standard is published and in effect, the 2015 Scope 2 Guidance applies. Check the GHG Protocol's latest updates before changing procurement strategy.
Practical steps now: collect hourly or at least monthly consumption data where meters allow; record the grid region of each site and each instrument; and prefer instruments from the same grid as your load.
How EKOTRACE helps
EKOTRACE calculates location-based and market-based Scope 2 side by side from the same consumption data. You record certificates, PPAs and supplier-specific rates against each site, and the platform applies the market-based hierarchy and residual mix factors with versioned sources, so both figures trace back to evidence. If you retire certificates or buy credits, the carbon offsetting team can advise on the difference between Scope 2 instruments and carbon credits.
See our GHG accounting page or the EKOTRACE overview.
Frequently asked questions
Do I have to report both location-based and market-based Scope 2?
Under the GHG Protocol Scope 2 Guidance, companies with operations in markets that offer contractual instruments must report both. Many disclosure frameworks also ask for both or for the location-based figure as a minimum. Check the framework you report under.
Which figure should we use for targets?
Companies may set targets on either basis but should say which. Many use market-based targets to reflect procurement, while also tracking location-based emissions to show actual grid impact.
Are RECs or I-RECs the same as carbon credits?
No. Certificates such as RECs and I-RECs represent the attributes of 1 MWh of renewable electricity and are used only in market-based Scope 2. Carbon credits represent a tonne of emissions reduced or removed elsewhere and cannot be used to lower Scope 2.
Will hourly matching become mandatory?
Not yet decided. As of October 2026 the GHG Protocol is developing an approach with two market-based methods, and a further public consultation is expected in 2027. The 2015 rules apply until a revised standard takes effect.