How to Calculate Scope 2 Emissions: A Step-by-Step Guide to Indirect Energy Emissions

 

Why Scope 2 Matters

Scope 2 emissions are the indirect greenhouse gases (GHGs) generated from the production of purchased electricity, steam, heating, or cooling used by your organization. While these emissions occur at utility plants (not your facility), they’re a critical part of your carbon footprint—and often the easiest to reduce through clean energy procurement.

Examples of Scope 2 emissions:

• Electricity from the grid (coal, natural gas, etc.)
• District heating/cooling systems
• Purchased steam

If your business pays an electricity bill, you have Scope 2 emissions—and investors, regulators, and customers are increasingly demanding transparency.

Step 1: Understand the Two Calculation Methods

Calculating Scope 2 emissions requires choosing between two fundamentally different approaches—location-based and market-based—each with distinct implications for transparency, compliance, and sustainability claims. 

Here’s a detailed breakdown:

1. Location-Based Method

What It Measures

The average carbon intensity of the local grid where your energy is consumed. This reflects the mix of coal, gas, renewables, and other sources powering your region.

How It Works

• Data Needed: Your total energy consumption (kWh).
• Emission Factor Source: Grid averages from:
• U.S.: EPA’s eGRID (e.g., 0.385 kg CO₂e/kWh for the U.S. grid in 2023).
• Europe: ENTSO-E or national agencies.
• Global: IEA or IPCC defaults.

Example Calculation

If your Texas office uses 100,000 kWh/year and the local grid factor is 0.45 kg CO₂e/kWh:

100,000 kWh × 0.45 kg CO₂e/kWh = 45,000 kg CO₂e (45 metric tons)

Pros & Cons

Pros	Cons
✅ Simple, standardized	❌ Doesn’t reflect clean energy purchases
✅ Required for many regulations	❌ May overstate footprint if using renewables
✅ Useful for regional comparisons	❌ No incentive for green procurement

2. Market-Based Method

What It Measures

Emissions based on what you specifically purchased (e.g., renewables, Renewables Energy Certificates (RECs) or supplier contracts). This reflects your actual energy choices.

How It Works

• Data Needed: Energy consumption + proof of clean energy purchases (e.g., RECs, PPAs).
• Emission Factor Source:
• RECs/Power Purchase Agreements (PPAs): 0 kg CO₂e/kWh (if 100% renewable).
• Utility Green Programs: Supplier-provided factors (e.g., 0.1 kg CO₂e/kWh for a "50% wind" plan).

Example Calculation:

Same 100,000 kWh/year usage, but you bought wind RECs (0 kg CO₂e/kWh):

100,000 kWh×0 kg CO₂e/kWh = 0 kg CO₂e

*Note: If only 50% of your energy is covered by RECs, calculate the remaining 50% using the location-based factor.*

Pros & Cons

Pros	Cons
✅ Rewards clean energy buyers	❌ Requires detailed tracking (RECs, contracts)
✅ Aligns with corporate sustainability goals	❌ Not accepted by all regulators (e.g., some require location-based)
✅ Can show "zero" emissions with 100% renewables	❌ Risk of double-counting RECs if not retired properly

Key Differences at a Glance

Aspect	Location-Based	Market-Based
Emission Factors	Grid average	Your specific energy purchases
Transparency	Shows regional impact	Shows procurement efforts
Regulatory Use	Often mandatory (e.g., EU CSRD)	Optional for claims (e.g., RE100)
Best For	Compliance, baselines	Sustainability branding

Why the GHG Protocol Requires Both

• Location-Based: Ensures comparability across regions.
• Market-Based: Incentivizes clean energy investments.

Example: Microsoft reports both:

• Location-based: 4.1 million tCO₂e (2023)
• Market-based: 0 tCO₂e (due to 100% renewables)

How to Choose for Your Business

1. For Compliance: Use location-based (required by SEC, EU).
2. For Sustainability Claims: Use market-based (e.g., "100% renewable" reports).
3. For Investors: Report both (GHG Protocol best practice).

 

Step 2: Collect Your Energy Data

To accurately calculate Scope 2 emissions, you need granular energy consumption data. This step explains how to gather and validate this information for electricity, heating, cooling, and steam.

Gather 12 months of energy consumption in kilowatt-hours (kWh) from:

• Electricity (main grid, renewable contracts)
• District heating/cooling (steam, hot water, chilled water)
• Purchased steam (common in industrial facilities)

*Exclude on-site generation (e.g., rooftop solar) – those are Scope 1 if you own the equipment.*

Source	How to Access	Data Needed
Utility Bills	PDFs from your provider or online portals	kWh usage per meter, billing period
Smart Meters	Real-time data via AMI (Advanced Metering Infrastructure)	Hourly/daily kWh data
Energy Management Systems (e.g., Siemens Navigator, Schneider Electric)	Automated dashboards	Monthly/yearly totals
Submetering	For large facilities with multiple meters	Breakdown by department/floor

Key Details to Capture

• Meter numbers (to avoid double-counting)
• Billing periods (align with reporting year)
• Tariff types (e.g., time-of-use rates may affect emission factors)

Example:

*"Facility A, Meter #12345: Jan-Dec 2023 = 250,000 kWh

Energy Type	Where to Find Data	Example
Electricity	Utility bills, smart meters, energy dashboards	*500,000 kWh/year*
District heating	Building management systems	*1,200 GJ/year*
Purchased steam	Supplier invoices	*800 tons/year*

⚠️ Critical Checks:

• Ensure units match emission factors (e.g., kWh for electricity, GJ for heat).
• Exclude on-site generation (e.g., solar panels)—those are Scope 1!

Unit Conversions

• 1 GJ = 0.278 MWh (for alignment with electricity)
• 1 ton of steam ≈ 2.78 GJ (varies by pressure/temperature)

Example:

*"District heating: 1,200 GJ/year = 333 MWh/year"*

Create a Master Dataset

Use a spreadsheet or carbon accounting software to log:

Facility	Meter ID	Energy Type	Usage (kWh/GJ)	Billing Period	Data Source
HQ Building	ELEC-789	Electricity	500,000 kWh	Jan-Dec 2023	Utility bill
Factory	STEAM-101	Purchased steam	800 tons	Jan-Dec 2023	Supplier invoice

 Check for Gaps & Errors

• Missing meters: Ensure all facilities/submeters are included.
• Unit mismatches: Convert all data to kWh or GJ for consistency.
• Time alignment: Fiscal vs. calendar year discrepancies

Key Takeaways

• Gather 12 months of data for all meters/facilities.
• Standardize units (kWh/GJ) early to avoid rework.
• Document sources for auditors (e.g., utility bills, RECs).

Next: With clean data, proceed to Step 3: Apply Emission Factors.

Step 3: Find Emission Factors

Emission factors (EFs) convert your energy usage (kWh, GJ, etc.) into CO₂ equivalents (CO₂e). Choosing the right factors is critical for accurate Scope 2 reporting. Here’s how to do it systematically.

Location-Based Method

These reflect the average carbon intensity of your local grid.

Use grid-average factors from:

• U.S.: eGRID (EPA)
• Europe: European Environment Agency
• Global: IEA Country Profiles

*Example (U.S. grid avg.): 0.385 kg CO₂e/kWh*

Market-Based Method

These reflect your actual energy purchases (e.g., renewables, RECs).

Use factors from:

• Renewable Energy Certificates (RECs)
• Power Purchase Agreements (PPAs)
• Utility green power programs

*Example: Wind power PPA = 0.01 kg CO₂e/kWh*

Real-World Example: Microsoft’s Approach

1. Location-based: Uses eGRID subregional factors for all facilities.
2. Market-based: Applies 0 kg CO₂e/kWh to 100% of usage (due to PPAs + RECs).
3. Discloses both in sustainability reports for transparency.

 

Step 4: Calculate Emissions

Now that you've gathered energy data and emission factors, it's time to crunch the numbers. This step transforms raw data into actionable carbon metrics.

 The Core Calculation Formula

For each energy type, use this basic formula:

Emissions (kg CO₂e) = Energy Consumed × Emission Factor

 

Location-Based Example

Emissions=Energy Used×Grid Factor

• Data: 500,000 kWh electricity × 0.385 kg CO₂e/kWh
• Total: 192,500 kg CO₂e (192.5 metric tons)

Market-Based Example

Same energy use, but with a wind PPA:

• 500,000 kWh × 0.01 kg CO₂e/kWh = 5,000 kg CO₂e (5 metric tons)

Note: The huge difference shows why clean energy procurement matters!

 

For enterprises with global operations:

1. Calculate emissions per facility using local factors
2. Sum all facilities for total Scope 2
3. Disclose breakdown (helps identify high-impact regions)

 

Example Template:

Facility	Energy (kWh)	EF	Emissions (tCO₂e)
Texas Plant	500,000	0.45	225
Germany HQ	200,000	0.35	70
Total	700,000	-	295

 

Real-World Case Study: Apple's Approach

1. Collects data from 500+ facilities worldwide
2. Uses location-based for compliance (e.g., 0.35 kg CO₂e/kWh in California)
3. Applies market-based for sustainability claims (0 kg CO₂e/kWh via PPAs)
4. Publicly discloses both methods in Environmental Progress Report

 

Step 5: Report Both Methods (GHG Protocol Best Practice)

The GHG Protocol requires reporting both location-based and market-based Scope 2 emissions for full transparency. Here's why and how to do it effectively, with real-world examples.

Why Report Both Methods?

Method	Purpose	Stakeholders Who Care
Location-Based	Shows your footprint based on local grid cleanliness (comparability)	Regulators, scientists, NGOs
Market-Based	Demonstrates your clean energy procurement efforts (leadership)	Investors, customers, ESG ra

How to Report: Template & Examples

Basic Disclosure Format:

**2023 Scope 2 Emissions** 

- Location-based: 45 tCO₂e (100,000 kWh × 0.45 kg/kWh) 

- Market-based: 5 tCO₂e (80% covered by RECs at 0 kg/kWh + 20% grid at 0.45 kg/kWh) 

 

Microsoft's 2023 Disclosure (Abbreviated):

*"Our global Scope 2 emissions:

• Location-based: 4.1 million metric tons CO₂e
• Market-based: 0 metric tons CO₂e (due to 100% renewable energy procurement via PPAs and RECs).

The difference reflects our investment in new wind and solar projects worldwide."
(Source: Microsoft Sustainability Report 2023)

 

Best Practice: Break down by region where factors vary significantly.

Example:

Region	Location-Based	Market-Based
U.S.	800 tCO₂e	200 tCO₂e
Germany	300 tCO₂e	0 tCO₂e (100% RE)
Total	1,100 tCO₂e	200 tCO₂e

 

Calculating Scope 2 emissions isn’t just about compliance—it’s a strategic opportunity to reduce costs, enhance transparency, and demonstrate leadership in the clean energy transition. By following this guide, you’ve learned how to:

1. Choose the right method (location-based for comparability, market-based for clean energy claims).
2. Gather accurate data (from utility bills, RECs, and supplier contracts).
3. Apply precise emission factors (grid averages or supplier-specific values).
4. Calculate and report transparently (meeting GHG Protocol standards).

Your Next Steps

• Start small: Focus on your largest electricity loads first.
• Engage suppliers: Ask utilities about green tariffs or REC options.
• Set targets: Align with the Science-Based Targets initiative (SBTi) for maximum impact.

Remember: Scope 2 is the easiest emissions category to reduce. With the right data and strategy, you can turn energy procurement into a climate solution.