GHG Protocol

Scope 2 Guidance
executive summary

An amendment to the GHG Protocol

Corporate Standard
1. Introduction to scope 2 emissions
Since the publication of the Corporate Standard in 2004, companies around the world have been seeking innovative
strategies to measure and manage their greenhouse gas (GHG) emissions. For most companies, emissions from purchased
electricity, steam, heating, and cooling (termed “scope 2” emissions) represent a significant emission source and operational
cost. To reduce these emissions, companies typically turn to energy conservation, efficiency upgrades, and low-carbon
electricity supply. But the mechanisms that allow corporate consumers to choose a low-carbon grid-delivered energy supply
vary by electricity market. Some companies can work with their electricity suppliers to purchase a low-carbon product, or
enter into power purchase agreements with individual generators. Consumers can also separately buy electricity attributes
via certificates that conveys information about energy production.

2. The need for scope 2 guidance Box 1 How this Guidance was developed
and international consistency
Accurately accounting for scope 2 emissions is essential in The Greenhouse Gas (GHG) Protocol is a multistakeholder
order to manage and reduce them. However, companies have partnership of businesses, nongovernmental organizations
not had standards that address whether and how emissions (NGOs), governments, and others convened by the World
from these diverse instruments should be accounted for in Resources Institute (WRI) and the World Business Council
a GHG inventory. As a result, scope 2 emission reports have for Sustainable Development (WBCSD). Launched in
varied between companies significantly, leaving internal and 1998, the GHG Protocol seeks to develop internationally
external decision-makers unable to assess and compare accepted GHG accounting and reporting standards and
corporate performance. The uncertainty around whether tools to promote their adoption in order to achieve a low
and how energy purchases contribute to meeting scope 2 emissions economy worldwide. All GHG Protocol standards
emission reduction goals has impeded corporate investment and guidance are available at www.ghgprotocol.org.
in, and demand for, low-carbon energy.
This Scope 2 Guidance represents a policy-neutral,
collaborative solution guided by GHG Protocol principles. It
was developed over four years of international consultation
3. What this Guidance provides
and discussion with participation from businesses, NGOs,
This Guidance provides a unified, internationally-consistent, GHG reporting programs, energy utilities and retailers,
transparent basis for companies to account for electricity renewable energy certification programs, government
purchases in their GHG inventory. The Guidance acts agencies, and scientific and academic institutions
as an amendment to the Corporate Standard, revising from around the world. It included scoping workshops
and updating the previously brief treatment of scope 2 conducted in London, Washington DC, and Mexico City
accounting boundaries and methods. It introduces: in 2010 and 2011; a Technical Working Group (TWG) that
contributed to discussion papers, conference presentations,
•• Requirements: Accounting and reporting requirements and draft proposals on accounting and reporting solutions;
which companies must meet to be in conformance with and a public comment period in spring 2014, including
the Corporate Standard. six webinars and three in-person workshops in London,
Dusseldorf, and Washington DC.
•• Quality Criteria: A list of Scope 2 Quality Criteria
that all electricity purchasing instruments—termed here
“contractual instruments”—need to meet in order to be
well as other metrics such as total electricity, steam,
used in market-based method accounting.
heating, and cooling consumed, and what percentage
•• Recommendations: Additional features companies of corporate operations have market-based method
should disclose about their electricity purchases, as data available.

2 Scope 2 Guidance
 Executive Summary

4. Who should read this Guidance energy, and specific subsidies or support schemes
for renewable energy. Policy makers play a key role in
This Guidance amends and adds to the Corporate Standard
determining the relationship between voluntary purchasing
requirements on scope 2 accounting and reporting. All
programs and regulatory policies.
organizations compiling a corporate GHG inventory following
the Corporate Standard—including companies, governments,
NGOs and other organizations—should use this Guidance.
5. Key changes introduced
The term “companies” is used throughout this document as
by the Guidance
shorthand for any organization compiling a corporate inventory.
5.1 For most companies, scope 2
Electricity suppliers, advocates, and policy makers will also
is no longer one number—it is two.
be well served to understand the new GHG accounting
For companies with any operations in markets
and reporting requirements, as well as the Scope 2 Quality
providing product or supplier-specific data in the form
Criteria (see Chapter 7). These affect whether a given
of contractual instruments, companies shall report
energy label, green power program, or other instrument
scope 2 according to a location-based method and a
can be used in corporate GHG inventories, and will
market-based method. Each method’s results reflect
influence the type of energy products and information
different risks and opportunities associated with
companies request. Market-based electricity tracking and
emissions from electricity1 use, and can inform different
purchasing programs inherently interact with policies
decisions and levers to reduce emissions. Companies
affecting the electricity sector, such as emission cap-
shall choose which method’s results to use for goal
and-trade regulations, supplier fuel mix and emissions
setting and other benchmarks.
disclosure rules, supplier quotas to source renewable

Box 2 Key Terms

Some terms used in this guidance are used for precision but are synonymous with other more familiar terms. For example:

Contractual instruments: Any type of contract between generator declarations. For the purpose of this guidance, the
two parties for the sale and purchase of energy bundled with term “energy attribute certificates” or just “certificates” will be
attributes about the energy generation, or for unbundled used as the general term for this category of instruments.
attribute claims. Markets differ as to what contractual
Energy generation facility: Any technology or device that
instruments are commonly available or used by companies
generates energy for consumer use, including everything from
to purchase energy or claim specific attributes about it, but
utility-scale fossil fuel power plants to rooftop solar panels.
they can include energy attribute certificates (RECs, GOs, etc.),
direct contracts (for both low-carbon, renewable, or fossil fuel Energy supplier: Also known as an electric utility,
generation), supplier-specific emission rates, and other default this is the entity that sells energy to consumers and can
emission factors representing the untracked or unclaimed provide information regarding the GHG intensity of
energy and emissions (termed the residual mix) if a company delivered electricity.
does not have other contractual information that meets the
Generators: Here used to mean the entity that owns or
Scope 2 Quality Criteria.
operates an energy generation facility.
Energy attribute certificate: A category of contractual
Green power product/green tariff: A consumer option
instrument that represents certain information (or attributes)
offered by an energy supplier distinct from the “standard”
about the energy generated, but does not represent the
offering. These are often renewables or other low-carbon
energy itself. This category includes a variety of instruments
energy sources, supported by energy attribute certificates or
with different names, including certificates, tags, credits, or
other contracts.

3
Methods for scope 2 accounting are “allocation”
methods—allocating generator emissions to
end-users. A location-based method reflects the
average emissions intensity of grids on which energy
consumption occurs (using mostly grid-average emission
factor data). A market-based method reflects emissions
from electricity that companies have purposefully
chosen (or their lack of choice). It derives emission
factors from contractual instruments, which include any
type of contract between two parties for the sale and
purchase of energy bundled with attributes about the
energy generation, or for unbundled attribute claims.

Markets differ as to what contractual instruments are

commonly available or used by companies to purchase
energy or claim specific attributes about it, but they can
include energy attribute certificates (RECs, GOs, etc.),
direct contracts (for both low-carbon, renewable, or fossil
fuel generation), supplier-specific emission rates, and other
default emission factors representing the untracked or
unclaimed energy and emissions (termed the residual
mix) if a company does not have other contractual
information that meets the Scope 2 Quality Criteria.

In this way, all companies required to report according to

the market-based method will have some type of data
Contractual instruments in the scope 2 market-
option. Not having contractual data for every site will not
based method are not carbon offsets. Renewable
cause non-compliance with the GHG Protocol Corporate
energy projects in some parts of the world may be eligible
Standard and Scope 2 Guidance. As with scope 3, a range
to produce a carbon offset, which conveys with it a claim
of data may be available. Companies should consult the
about tons of GHG emissions avoided by the operation of
hierarchy of emission factors for both location-based and
that project compared to a business-as-usual scenario. By
market-based methods. Any data on those hierarchies
contrast, contractual instruments convey an emission rate—
(including using location-based emission factors in the
that is, emissions per megawatt hour (MWh) associated with
absence of contractual information) are acceptable.
that generation’s facilities. This emission factor is expressed
Contractual instruments recognized in the in the same units used in location-based emission factors.
market-based method include more than green
power purchases. These contractual purchases 5.2 Instruments used as emission factors
include green power programs, any supplier-specific in the market-based method must
label or delivery metric, and fossil fuel contracts. Those meet Scope 2 Quality Criteria.
companies without specified purchases must use a These criteria ensure the overall integrity and reliability
residual mix—a type of emission factor representing of reported market-based results. These eight Scope 2
the average emissions from all unclaimed energy. Quality Criteria, designed around existing best practices
around the world, specify the mechanics that ensure
market-based accounting works in practice and prevents
double counting. These criteria are summarized in Table 1.

4 Scope 2 Guidance
 Executive Summary

Table 1 S
 cope 2 Quality Criteria

All contractual instruments used in the market-based method for scope 2 accounting shall:

1. Convey the direct GHG emission rate attribute associated with the unit of electricity produced.
2. Be the only instruments that carry the GHG emission rate attribute claim associated with that quantity of electricity generation.
3. Be tracked and redeemed, retired, or canceled by or on behalf of the reporting entity.
4. Be issued and redeemed as close as possible to the period of energy consumption to which the instrument is applied.
5. Be sourced from the same market in which the reporting entity’s electricity-consuming operations are located and to which the
instrument is applied.

In addition, utility-specific emission factors shall:

6. Be calculated based on delivered electricity, incorporating certificates sourced and retired on behalf of its customers. Electricity
from renewable facilities for which the attributes have been sold off (via contracts or certificates) shall be characterized as having
the GHG attributes of the residual mix in the utility or supplier-specific emission factor.

In addition, companies purchasing electricity directly from generators or consuming on-site generation shall:

7. Ensure all contractual instruments conveying emissions claims be transferred to the reporting entity only. No other instruments
that convey this claim to another end user shall be issued for the contracted electricity. The electricity from the facility shall not
carry the GHG emission rate claim for use by a utility, for example, for the purpose of delivery and use claims.

Finally, to use any contractual instrument in the market-based method requires that:

8. An adjusted, residual mix characterizing the GHG intensity of unclaimed or publicly shared electricity shall be made available for
consumer scope 2 calculations, or its absence shall be disclosed by the reporting entity.

5.3 Companies should disclose key These variations can make it difficult to compare and
features and policy context of understand the procurement choices a company has made
their contractual instruments. in different markets. This Guidance recommends companies
Contractual instruments can come from a variety of disclose information about the energy generation facilities
energy generation facilities depending on the market. and policy context reflected in their contractual instruments,
In some markets, only renewable energy facilities can in order for company decision-makers and stakeholders to
produce certificates, while in other markets all generation get a clearer picture about how well the purchase aligns with
may be eligible to produce certificates. Some voluntary other company goals. In particular, stakeholders evaluating a
certificates are from single-instrument systems, meaning company’s contribution to mitigating global emissions may
that the voluntary certificate is inherently in addition to any be interested in how a company is driving change in supply.
supplier quotas. Other markets use multiple instruments
Some of these key features are elaborated in Table 2.
simultaneously, meaning that multiple instruments may
be issued from a single MWh, for voluntary consumer
claims and to meet regulatory requirements.

5
Table 2 Example instrument features and policy context

Instrument labels

Certification or label name (if applicable). This can include certification such as Green-e Energy (U.S.), EcoLogo (Canada), or
labels such as EKOenergy and Naturemade in the EU. The certification or label name should also specify what is being certified, e.g.
in the U.S. Green-e Energy certifies against a set of requirements described in their National Standard.

Incremental funding programs. This should specify whether the instrument is associated with a certification label or supplier
program that contributes incremental funding to new projects, and if so what quantity of funding is included with the company’s
contractual purchase.

Energy generation facility features

Energy resource type. Instruments should clearly identify the resource generating the certificate. For supplier-specific emission
rates, the resource type could be “mix” for standard offers, “multiple renewable” for certain green power products, or cite the specific
resource used. Residual mix will typically be a “mix.”

Facility location. Depending on the information available from the certificate, supplier, or contract, the generation facility location
could be identified at a national or subnational level (either geopolitical such as a U.S. state, and/or a grid region such as a North
American Electric Reliability Corporation (NERC) region.

Facility age. Stakeholders may wish to know whether the purchase consists largely of generation attributes from older facilities or
more recently constructed projects. Companies should note the year the generation facility that created the certificate/contract was
first operational or substantially repowered.

Policy context

Supplier quotas. The contractual instrument claimed will relate differently to instruments used for supplier quotas, depending on
the market. Companies should note the relationship between their contractual instruments following the list of options in Table 10.2.

• Cap and Trade. Is the facility that produced the instruments you claim affected by a cap and trade policy? (Y/N)
•• If yes, does the cap and trade program allocate allowances for retirement on behalf of voluntary renewable electricity
purchases from this facility? (Y/N)
•• If yes, were allowances retired on behalf of your voluntary purchase of instruments from this facility? (Y/N) If so, these
allowances should be reported (in metric tons) separately from the scopes.

Funding/Subsidy Receipt. The funding disclosed here can highlight recent funding or subsidy policies directly and substantially
affecting the generation facility.

Offsets. Is the facility producing offset credits from the same MWh reflected in the contractual instrument? (Not applicable to
contractual instruments in most industrialized electricity markets.)

Other policy instruments. This includes any other policy instruments bundled/retired voluntarily by the company itself,
a certificate certification program, supplier label, etc.

Endnote
1. Electricity is used as shorthand to include purchased steam, heat,
cooling, and electricity.

6 Scope 2 Guidance
 Executive Summary

Author
Mary Sotos

Ghg Protocol Team Funders

Pankaj Bhatia, World Resources Institute
This standard development process was generously
Cynthia Cummis, World Resources Institute
supported by Walmart, H&M, Microsoft, EY, the United
Mark Didden, World Business Council
Kingdom Department for Environment, Food & Rural Affairs,
for Sustainable Development
and the United States Environmental Protection Agency.
Alex Kovac, World Resources Institute
Josh Ryor, World Resources Institute
Amanda Stevens, World Resources Institute

World Resources Institute World Business Council for

Sustainable Development (WBCSD)
WRI is a global research organization that works closely
with leaders to turn big ideas into action to sustain The WBCSD is a CEO-led, global coalition of some
a healthy environment—the foundation of economic 200 companies advocating for progress on sustainable
opportunity and human well-being. development. Its mission is to be a catalyst for innovation
and sustainable growth in a world where resources are
Our Challenge increasingly limited. The Council provides a platform
Natural resources are at the foundation of economic for companies to share experiences and best practices
opportunity and human well-being. But today, we are on sustainable development issues and advocate for
depleting Earth’s resources at rates that are not sustainable, their implementation, working with governments, non-
endangering economies and people’s lives. People depend governmental and intergovernmental organizations.
on clean water, fertile land, healthy forests, and a stable The membership has annual revenues of USD 7 trillion,
climate. Livable cities and clean energy are essential for a spans more than 35 countries and represents 20 major
sustainable planet. We must address these urgent, global industrial sectors. The Council also benefits from a
challenges this decade. network of 60 national and regional business councils
and partner organizations, a majority of which are based
Our Vision in developing countries.
We envision an equitable and prosperous planet driven by
the wise management of natural resources. We aspire to
create a world where the actions of government, business,
and communities combine to eliminate poverty and sustain
the natural environment for all people.
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 The Greenhouse Gas Protocol
provides the foundation for
sustainable climate strategies.
GHG Protocol standards are the
most widely used accounting tools
to measure, manage and report
greenhouse gas emissions.

www.wri.org www.ghgprotocol.org