Market-based versus location-based electricity emissions: what each one tells you
The same electricity consumption produces two different emission figures. Guarantees of origin, certificates and which figure belongs in an LCA.
By clca Editorial TeamLast updated
If a facility consumes 10 GWh of electricity a year, what are its emissions? The question has two valid answers, and the GHG Protocol requires both to be reported. That is not an inconsistency but a deliberate design: the two figures measure two different realities.
Location-based: physical reality
The location-based method uses the average emission intensity of the grid you sit on. Physically you cannot choose which electrons you receive; connected to a grid, you consume from that grid’s generation mix. This method reflects the real carbon intensity of where your facility is, and shows the effect of siting and grid decarbonisation.
Market-based: contractual reality
The market-based method reflects your electricity contracts. If you buy renewable guarantees of origin, sign a power purchase agreement with a specific generator or use a green tariff, those contracts’ emission factors apply. Consumption not covered by a contract uses a residual mix factor.
Residual mix is a critical but frequently skipped concept. Where certificates for a grid’s renewable generation have been bought by others, the mix left for consumers without certificates is dirtier. Using the grid average in that situation double-counts.
Does buying certificates count as real abatement?
This is one of the most contested questions in sustainability reporting. Buying certificates takes your market-based Scope 2 to zero but does not change atmospheric CO₂ — you have relabelled the output of an existing renewable plant. Long-term power purchase agreements that create additional renewable capacity are different; they finance a new plant.
Which is why serious reporting frameworks ask for both figures and let the reader see the gap. If your location-based figure is high while your market-based figure is zero, that information is itself meaningful.
Which one belongs in an LCA?
On the LCA and EPD side the default is the location-based factor, which reflects physical reality. When preparing an EN 15804+A2 EPD, using a contractual green electricity claim requires the applicable product category rules to permit it and the source to be documentable. Otherwise the country grid factor applies.
Tags
- Scope 2
- market-based
- location-based
- renewable energy
- electricity emission factor
- guarantee of origin
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