Understanding GHG Protocol Scope 2: The Dual Reporting Framework

Location-based versus market-based emissions accounting, Quality Criteria for contractual instruments, and why both methods matter for corporate climate strategy.

By Koorosh Behrang • March 2026 • 12 min read

1/3+ of global GHG from electricity & heat

2015 Scope 2 Guidance published

5 Quality Criteria for instruments

1	What Scope 2 Encompasses

The GHG Protocol Scope 2 Guidance, published as an amendment to the Corporate Accounting and Reporting Standard, fundamentally shapes how organizations worldwide account for emissions from purchased electricity.

The guidance establishes the technical framework that enables organizations to measure, report, and reduce emissions from electricity consumption while providing transparency into procurement choices.

Scope 2 covers indirect emissions from the generation of purchased or acquired electricity, steam, heat, or cooling consumed by the reporting organization.

The scope includes grid-delivered electricity from utilities and district heating systems. It excludes emissions from electricity generated and consumed within the same facility boundary (Scope 1), transmission losses (Scope 3), and upstream emissions from fuel production (also Scope 3).

2	The Dual Reporting Framework

The 2015 Scope 2 Guidance introduced mandatory dual reporting. Organizations must now report Scope 2 emissions using both location-based and market-based methods and clearly label each result.

Location-Based Grid Average Emissions Shows exposure to regional grids Reveals regulatory risk Demonstrates absolute impact Independent of procurement

Market-Based Contractual Instruments Reflects procurement choices Shows renewable strategy impact Creates accountability Incentivizes low-carbon electricity

3	Scope 2 Quality Criteria

For market-based accounting to function consistently, the Scope 2 Guidance establishes five Quality Criteria that contractual instruments must satisfy. These criteria represent the minimum features necessary for global consistency.

1 Convey GHG Emission Rate

2 Sole Conveyor of Rate Claim

3 Tracked & Retired

4 Issued Close Vintage

5 Same Market as Consumption

Criterion 1: Convey GHG emission rate. The contractual instrument must convey information about the GHG emission rate of the electricity product. Without clear emission rate information, the instrument cannot serve its fundamental purpose.

Criterion 2: Be the only instrument carrying the emission rate claim. This prevents double-counting scenarios where both a utility and a renewable energy certificate holder claim the same zero-emission attributes.

Criterion 3: Be tracked and retired. The instrument must be tracked and retired by or on behalf of the reporting entity. Retirement ensures the instrument cannot be reused, preventing double-counting.

Criterion 4: Be issued in a vintage close to the consumption period. Most markets consider generation from the reporting year or immediately prior year to be appropriate. This temporal matching requirement ensures claims reflect contemporaneous generation.

Criterion 5: Be sourced from the same market as consumption. Market boundaries typically follow national borders. This criterion prevents organizations from purchasing certificates from distant grids with no physical connection to their operations.

4	Contractual Instruments

Organizations can use various contractual instruments to support market-based Scope 2 reporting, provided they meet the Quality Criteria. The most common instruments include energy attribute certificates (RECs), power purchase agreements, and supplier-specific emission rates.

Instrument Type	Characteristics	Quality Criteria Alignment
Energy Attribute Certificates (EACs/RECs)	Tradable instruments representing environmental attributes of 1 MWh of generation; can be bundled or unbundled	Strong alignment when tracked and retired
Power Purchase Agreements (PPAs)	Direct contracts with specific generation projects; typically long-term commitments	Strong alignment; excellent for new capacity support
Supplier-Specific Rates	Utility contracts specifying generation mix or carbon-free options	Moderate alignment; depends on supplier substantiation
Residual Mix	Grid generation after all contractual claims subtracted; "unclaimed" emissions	Fallback option where instruments unavailable

5	Emissions Calculation Fundamentals

Calculating Scope 2 emissions follows a consistent approach across both methods: multiply activity data by appropriate emission factors. The key difference lies in which emission factors apply.

Activity Data MWh Consumed

×

Emission Factor kg CO₂e / MWh

=

Total Emissions kg CO₂e

Activity Data Collection

Collect electricity consumption data in kilowatt-hours or megawatt-hours from utility bills, meter readings, or facility management systems. Where direct measurement is infeasible, estimation methods based on square footage or operating hours may be necessary.

Emission Factor Selection

Location-Based: Use grid-average emission factors for consumption locations, then substitute national or subnational averages where more granular data doesn't exist.

Market-Based: Use contractual instruments first, then supplier-specific factors, then residual mix, and finally location-based factors as last resort.

Method	Emission Factor Source	What It Shows
Location-Based	Grid-average emission factors	Exposure to regional grid emissions; regulatory risk
Market-Based	Contractual instruments or residual mix	Emissions from procurement choices; strategy effectiveness

6	Reporting Requirements & Reduction Strategy

Organizations must disclose both location-based and market-based Scope 2 emissions, clearly labeled by method. Report total electricity consumption separately from emissions to distinguish between reductions achieved through efficiency versus cleaner procurement.

Emissions Reduction: Two Primary Mechanisms

Scope 2 emissions reductions occur through: (1) consuming less electricity via efficiency measures and operational changes, and (2) procuring cleaner electricity through renewable purchases and utility contracts.

Performance Tracking Scenarios

↓ Both Falling Location-based and market-based emissions declining together demonstrates comprehensive management through efficiency and procurement.

↓↑ Diverging Positively Location-based rising, market-based falling = successful renewable procurement in context of business growth.

↑↑ Diverging Negatively Location-based stable, market-based rising = procurement strategy deterioration from contract expirations or neglect.

Setting Meaningful Targets

Establish base-year emissions for both methods, then set reduction targets specifying which method applies. Many organizations commit to absolute reduction targets for location-based emissions while pursuing market-based reductions through procurement. Science Based Targets require absolute reduction commitments but allow market-based methods for Scope 2.

Effective target-setting accounts for anticipated changes in both consumption patterns and procurement opportunities. The dual framework makes dynamics transparent rather than masking them.

7	Scope 2 Guidance Update: Under Public Consultation

The GHG Protocol Scope 2 Guidance, originally published in 2015, introduced foundational requirements for how organizations account for indirect emissions from purchased electricity, steam, heat, and cooling. The updated guidance under public consultation addresses several areas where the evolving energy landscape demands greater clarity and consistency.

Key Areas Under Review

Topic	Current Framework (2015)	Proposed Updates
Dual Reporting	Required where contractual instruments are available	Strengthened requirements and clearer criteria for when dual reporting applies
Quality Criteria	Five criteria for contractual instruments	Enhanced criteria addressing temporal matching and geographic specificity
Emission Factors	Hierarchy for location-based and market-based methods	Updated hierarchies reflecting advancements in granular data availability
Temporal Matching	Annual vintage matching required	Discussion of hourly and sub-annual matching requirements
Disclosure	Recommended additional disclosure on instrument features	Expanded disclosure requirements aligned with regulatory developments

8	Scope 2 Strategy Made Practical

Mastering Scope 2 requires more than understanding the framework — it demands an integrated approach to strategy, procurement, and reporting. Climate Decode's Canopy platform brings together everything organizations need under one roof.

Canopy replaces fragmented Scope 2 workflows with a single, auditable workspace — from ambition setting through procurement to compliance reporting.

About the Author Koorosh Behrang Climate Decode Koorosh leads Climate Decode’s Scope 2 and renewable energy procurement practice, helping organizations design dual reporting strategies, implement Quality Criteria compliance, and optimize renewable electricity procurement for maximum emissions impact and cost efficiency.