Alert - I am actively seeking an energy, climate risk, ESG or sustainability analyst role in Ireland or elsewhere in Europe. Please reach out if you would like to connect or chat about potential opportunities.

Calculating scope 2 emissions

Author

Shel

The next step after establishing the scope 2 boundary is calculating emissions. This phase consist of seven steps, which are described in detail below.

Sources of emissions from purchased and consumed electricity, heat, steam or cooling can be identified on the basis of utility bills or metered energy consumption at facilities within the inventory boundary.

To determine whether to calculate scope 2 emissions using the market-based method, a reporting company should assess whether differentiated energy products in the form of contractual instruments, including direct contracts, certificates, or supplier specific information, are available in the market it operates in. If so, then the market-based method should be applied, but only if the contractual instruments meet the scope 2 quality criteria. If the contractual instruments do not meet the quality criteria, then location-based data should be used.

If a multi-regional company has any operations within the corporate inventory where the market-based method applies, then this method should be calculated for the entire corporate inventory to ensure completeness and consistency. For any individual operations in the corporate inventory where market-based method data is not available or applicable, data from the location-based method should be used to represent the emissions from the facility. For these operations, the market-based scope 2 emissions value will be identical to the location-based emissions value.

If no facilities in the entire organizational boundary of the reporting company are located in markets with contractual claims systems, or where no instruments within those systems meet the scope 2 quality criteria, then only the location-based method should be used.

Activity data includes all electricity purchased/acquired and consumed during the reporting period, including from owned/operated generation facilities where energy attributes, e.g certificates, have been sold or transferred.

To determine activity data, metered electricity consumption or utility bills specifying consumption in MWh or kWh units can provide the most precise activity data. In cases where the reporting company operates in a shared space without individual energy metering, the building’s electricity usage may be allocated to all tenants based on each tenant’s square footage and the building’s occupancy rate. This method is known as the Area method and is one of the methods used to allocate emissions to different entities.

The different scenarios that companies need to consider to determine which scope category their electricity consumption falls into are covered in this post. In summary, a reporting company can either:

  1. generate electricity on-site and consume it (scenario 1);

  2. receive electricity via direct line transfer from another company (scenario 2);

  3. receive electricity via the electric grid (scenario 3); or

  4. generate electricity on-site, consume some, sell some to the grid and buy some from the grid (scenario 4);

Companies that generate electricity on-site can generate and sell energy attribute certificates to third parties. If a company consumes electricity tied to sold certificates, they are termed to be consuming ‘null power’. They can no longer claim the energy attributes of this electricity. These entities should calculate consumption using other market-based emission factors such as a supplier-specific emission rate or the residual mix emission rate. Step 5 below provides additional details regarding these emission factors.

The emission factors used to calculate scope 2 emissions depends on the accounting method. The figure below serves as a guide for determining which accounting method to use.

dt-accounting-method.png

Source: GHG Protocol Scope 2 Guidance

Location-based

The emission factors necessary to estimate location-based scope 2 emissions include GHG emission intensity factors for energy production in a defined local or national region. Grid emission factors are a broad category of datasets that characterize all the GHG emissions associated with the quantity of electricity generation produced from facilities located within a specified geographic boundary. They measure the amount of carbon emissions per unit of electricity generated.

Market-based

In the market-based method, different contractual instruments contain GHG emission rate information that function as emission factors that can be used to calculate GHG emissions.

An energy supplier can provide information to its consumers regarding the GHG intensity of delivered electricity. The supplier-specific emission factor may be a standard product offer or a differentiated product such as a renewable energy product or tariff.

To prevent double counting of GHG emission rate claims tracked through contractual instruments, the market-based method requires an emission factor that characterizes the emission rate of untracked or unclaimed energy. This emission factor represents the regional emissions data that consumers should use if they operate in a market with a choice for consumers, differentiated products, and supplier specific data, but did not purchase certificates or a specified product, do not have a contract with a specified source, or do not have supplier-specific information. The residual emission factor should also be used by companies that consume “null power” i.e. energy attached to energy attribute certificates that have already been sold to third parties.

Each unit of electricity consumption should be matched with an emission factor appropriate for that consuming facility’s location or market. For the market-based method, this means choosing a contractual instrument or information source for each unit of electricity. For instance, if a company has purchased certificates to apply to half of a given operation’s electricity use, it will need to use other instruments or other information to calculate emissions for the remaining half.

A company centrally purchasing energy attribute certificates on behalf of all its operations in a single country or region should indicate how they match these purchases to individual site consumption.

To calculate emissions according to one or both methods;

  1. multiply activity data from each operation by the emission factor for that activity, for each applicable GHG;

  2. multiply global warming potentials (GWP) values by the GHG emissions totals to calculate total emissions in CO2 equivalent (CO2e);

  3. report final scope 2 values for each method in metric tons

Finally, to report a corporation’s total GHG emissions, companies need to gather and summarize data from multiple facilities, possibly in different countries and business divisions.