Location vs Market Based Emissions: The Ultimate Guide to Scope 2 Dual Reporting

Understanding Location vs Market-Based Emissions: A Clear Guide

Carbon reporting can feel like a minefield. Especially when you’re trying to do things properly - not just tick a box.

Scope 2 electricity emissions is an area that often causes confusion. The GHG Protocol sets out two ways to report electricity emissions: location-based and market-based. Both are valid. Both are required. But they tell slightly different stories about your impact.

In this guide, we’ll break down what each approach involves, how to calculate them, and how to avoid greenwash. If you’re looking to report your emissions credibly - or just understand what the jargon means - you’re in the right place.

First, what is Carbon Accounting?

Carbon accounting is the process of measuring and reporting the greenhouse gas (GHG) emissions your business creates.

The most widely used standard is the Greenhouse Gas Protocol. It provides guidance for calculating greenhouse gas emissions consistently - so that organisations follow a common methodology and emissions are comparable from between organisations.

The GHG Protocol emissions are grouped into:

Scope 1: Direct emissions from things you own or control, like gas boilers or company vehicles.
Scope 2: Indirect emissions from purchased electricity you use.
Scope 3: Everything else - from business travel to supplier emissions.

The distinction between location-based and market-based emissions applies to your Scope 2 emissions - specifically those related to your consumption of electricity.

These are the emissions that occur at the power plant when you use electricity within your organisation, whether that's to switch in the office lighting or power your manufacturing processes.

Location vs Market-Based Emissions: An Overview

The location-based and market-based methods allow businesses to report their Scope 2 emissions in two different ways:

Location-based method reflects the carbon intensity of the local power grid where your physical electricity consumption is based. It ignores who your electricity supplier is or what tariff you're on - it simply applies a national average emissions factor.
Market-based method reflect the electricity you’ve actually chosen to buy. It takes into account your energy contracts (e.g. 100% renewable energy tariffs) and certificates (like renewable energy certificates or REGOs).

They exist because they serve different purposes and reflect different realities.

Location based emissions are an accurate reflection of the electricity you are actually, physically consuming - even if you have a renewable energy tariff, you're still getting the same power grid electricity through the mains supply as everyone else.

But market based emissions allow businesses to account appropriately for the positive impact they might be having if they procure 100% renewable energy - which really means that their energy provider has agreed to supply enough renewable energy to the power grid to match their usage.

Location-Based Emissions: A Closer Look (UK Example)

The location-based method is the default, and it’s simple to calculate.

Gather your electricity usage – usually in kilowatt hours (kWh), from your energy bills or smart meter.
Apply a national average emissions factor – in the UK, this comes from DEFRA and changes annually to reflect the UK energy mix.

So if your office used 10,000 kWh of electricity in a year, and the DEFRA grid average is 0.19338 kgCO₂e per kWh (2023 figure), your Scope 2 emissions would be:
  
10,000 x 0.19338 = 1,933.8 kgCO₂e

It doesn’t matter who your electricity supplier is or what tariff you’re on - the location-based method applies the same emission intensity to everyone. This is a reflection of the overall energy mix and emission intensity in the UK over a given year: it's based on the share of renewable energy and fossil-fuel based energy.

✅ Pros: Easy, consistent, based on the electricity you are physically consuming.

❌ Cons: Doesn’t reward businesses that have switched to green energy.

Market-Based Emissions: A Deeper Dive

The market-based method gives you credit for your renewable energy purchases. But it’s a little more complex.

There are three main ways to calculate market-based emissions, depending on what data you have:

1. Supplier-Specific Factor

If your electricity supplier provides a verified emissions factor for your tariff - and it meets GHG Protocol quality criteria (see below) - you can use it.

If you’re on a 100% renewable tariff (and the tariff is backed by high-quality REGOs or power purchase agreements), the emissions factor might be zero.

For example:

You use 10,000 kWh.
Your supplier issues a 0.0 kgCO₂e/kWh factor.
You calculate emissions market-based as zero.

But it’s not enough for the supplier to simply say it’s renewable - they need to prove it.

2. Residual Mix

If your supplier doesn’t provide a verified emissions factor, you must use the residual mix emission factor. This represents the emission intensity of the grid after all the renewable claims are stripped out.

The residual mix emission factor is higher in emission intensity than the national average because it excludes the clean electricity consumption already claimed by others.

3. Default National Average (last resort)

If neither of the above is available, you can fall back on the national average. But that’s a last resort under GHG Protocol rules - and it undermines the purpose of market-based reporting.

So, overall, what are the pros and cons of the market-based method?

✅ Pros: Reflects your electricity consumption. More accurate if you're buying renewable energy.

❌ Cons: Requires more documentation. Low-quality green tariffs may not count. Greenwash risk.

Dual Reporting: What the GHG Protocol Says

The GHG Protocol requires both location and market based emissions to be reported for Scope 2 electricity consumption emissions. Why?

Because this gives stakeholders a more complete picture:

Location-based emissions show what your emissions are based on where you are.
Market-based emissions show what your emissions are based on what you buy.

This dual approach avoids greenwash and gives credit for buying renewable energy contracts where it’s due - while still showing the underlying reality.

At Seedling, we do both by default. Our clients don’t have to choose one or the other - we give them a full, compliant picture.

Scope 2 Quality Criteria: What Counts as ‘Renewable Energy’?

Not all renewable energy is created equal.

Some suppliers sell “green tariffs” that are backed by certificates (like REGOs in the UK) - but the actual power they deliver might come entirely from fossil fuels, not renewable energy. You can read our detailed guide to this here.

Under the GHG Protocol, to count a green tariff toward your market-based emissions, it must meet Scope 2 Quality Criteria, including:

Proof of origin: e.g. backed by valid, exclusive certificates.
Temporal matching: generated in the same year it’s consumed.
Geographic relevance: ideally from the same country or region.

If your tariff relies on buying cheap renewable energy credits (REGOs) without supporting real renewable generation, you may not be able to claim zero emissions.

Where Do Solar Panels Fit In?

Solar panels count as on-site renewable generation, and they’re treated a bit differently.

If you consume the electricity you generate:

It reduces your location-based emissions (because you buy less grid electricity).
It also reduces your market-based emissions (because you’re not using purchased electricity at all).

This is a good news story. You get credit under both methods, and you’re actively reducing demand on the grid.

How We Help

We make carbon accounting - including reporting of your energy related emissions - simple, credible, and aligned with best practice.

With Seedling, you get:

Dual reporting of Scope 2 emissions (location and market-based)
Support with residual mix calculations
On-site generation tracking, including solar panels
Automated GHG Protocol-compliant reports – ready for clients, accreditors, and Net Zero targets

You don’t need to become a carbon expert. We’ll guide you through the whole thing.