Location-Based vs. Market-Based Emissions: What Organisations Need to Know

Written by: Energy Guardians

Last Updated: May 30, 2025

When it comes to greenhouse gas (GHG) accounting, understanding how to measure your emissions is key to creating an accurate carbon footprint and identifying ways to reduce it. Two crucial concepts often discussed in corporate emissions reporting are location-based and market-based emissions. While they might sound technical, they reflect different ways of calculating your organisation’s emissions, each with important implications for your sustainability strategy. It is important to note that location-based and market-based emissions accounting applies specifically to Scope 2 emissions; the indirect emissions from purchased electricity, steam, heating, and cooling. These methods do not apply to Scope 1 emissions (direct emissions from owned or controlled sources) or Scope 3 emissions (other indirect emissions across the value chain).

By understanding the difference between these approaches, we can make more informed decisions about how we use energy and the impact of our purchasing choices.

Let us break down what these terms mean and why they matter.

What Are Location-Based Emissions?

Location-based emissions are calculated using the average emissions intensity of the grid where your energy is consumed. This means your organisation’s electricity emissions are tied to the general mix of energy sources (coal, gas, renewables, etc.) in your local or national grid.

For example:

• If your office is in the UK, your location-based emissions will reflect the UK’s energy mix.

• If the grid is cleaner (e.g., higher renewables), your location-based emissions will be lower, regardless of your individual electricity contract.

Key points:

• Reflects the actual grid emissions where you operate.

• Helps organisations understand the broader environmental impact of their energy use.

• Can highlight the need for energy efficiency improvements.

What Are Market-Based Emissions?

Market-based emissions consider the specific electricity you purchase; often through energy contracts or certificates like Renewable Energy Guarantees of Origin (REGO) in the UK or Renewable Energy Certificates (RECs) elsewhere. This approach reflects your organisation’s choices to support low-carbon electricity sources, even if the grid itself has a higher emissions intensity.

For example:

• If you have a contract with a supplier providing 100% renewable electricity, your market-based emissions could be zero for Scope 2.

• This approach rewards organisations that make proactive choices in their energy procurement.

Key points:

• Reflects your organisation’s purchasing decisions.

• Can lower your reported emissions, encouraging a shift to greener energy options.

• Helps demonstrate commitment to sustainability and renewable energy sourcing.

Why Both Metrics Matter?

Both location-based and market-based emissions provide valuable insights, and most international reporting standards, like the Greenhouse Gas Protocol, recommend reporting both:

Aspect	Location-Based Emissions	Market-Based Emissions
Definition	Based on grid average emissions intensity	Based on electricity purchased (contracts, RECs)
Focus	Regional energy system impacts	Individual procurement decisions
Use Case	Understanding grid impact, efficiency actions	Demonstrating renewable energy commitments
Typical Source of Data	National grid factors	Supplier-provided emission factors or certificates

By reporting both, organisations gain a full picture of their emissions and can make informed decisions on energy use and procurement strategies.

When to Use Each Method

Location-Based Reporting:

• When you want to understand your impact on the grid.

• For mandatory reporting schemes that require grid factors (like the UK’s SECR).

• To benchmark energy efficiency across sites.

Market-Based Reporting:

• To highlight renewable energy purchases and support for low-carbon generation.

• For voluntary sustainability reporting and net-zero commitments.

• To track progress in reducing emissions through procurement choices.

What Organisations Should Do Next

Collect Accurate Data: Gather information on your electricity contracts, certificates, and sources.

Use the UK Government Emission Factors: For location-based reporting in the UK, use the official grid factors published annually by DESNZ.

Ensure Transparency: Clearly state which method you are using in your reports and ideally report both.

Seek Expert Support: If you are unsure how to apply these methods, or need help setting up your carbon accounting framework, Energy Guardians Limited is here to assist. We offer bespoke GHG accounting services tailored to your organisation’s needs.

Get in touch at energyguardiansltd@gmail.com or visit www.energyguardiansltd.com to learn more.

Final Thoughts

Understanding the difference between location-based and market-based emissions is essential for any organisation serious about sustainability. Both perspectives matter: one reflects the energy system you are part of, while the other reflects your individual choices. By considering both, you can build a comprehensive, credible, and impactful carbon management strategy.

Ready to take the next step in your sustainability journey? Let us make it happen; together!