Scope 2: Electricity

Electricity consumption (Scope 2) covers all the emissions related to electricity consumed directly by the reporting company. For many organizations, electricity represents one of the main sources of emissions.

In the electricity value chain, an energy producer generates electricity by using primary sources of energy such as fossil fuels or renewable energy (e.g. wind or solar power). Once energy is generated, it is either consumed on-site, or distributed to another entity by direct line transfer or through the electricity grid.

1) How this category aligns with carbon accounting standards

The Cozero category, Electricity, is a source of Scope 2 emissions, as defined by the GHG Protocol. Other types of consumed energy also fall into Scope 2 but are represented in the separate Cozero category “Purchased heat, steam & cooling”.

The GHG Protocol Corporate Standard

The GHG Protocol Corporate Standard is an internationally-recognized go-to standard for estimating and reporting corporate GHG emissions. GHG emissions are categorized into three ‘Scopes'. For further information see here.

Scope 1 includes direct GHG emissions that originate from sources that are owned or controlled by the reporting company, e.g. generation of electricity, heat and steam, physical or chemical processing, transportation of materials and fugitive emissions. They are the most important source of emissions because they are the direct result of companies’ activities.

Scope 2 encompasses indirect emissions from the generation of purchased or acquired electricity consumed by the reporting company. These emissions are considered to be indirect because, although they arise as a result of the reporting company’s activities, they originate from sources that are owned and controlled by external entities.

In turn, these emissions are categorized as Scope 1 for the energy producer that generated the electricity, given that they arise from their owned and controlled resources.

Other upstream emissions associated with the transmission and distribution of energy within a grid are included in Scope 3.

2) Accounting & calculation methods

Here are the various calculation methods available in Cozero Log for calculating Scope 2 emissions from Electricity consumption. Users should choose the method that is the most appropriate to the data available to them, to their business goals and the significance of the emissions of the category.

Scope 2 reporting is heavily based on a dual accounting and reporting approach defined by the Greenhouse Gas Protocol. This approach requires companies to report two sets of Scope 2 emissions: market-based and location-based emissions. This approach is required by many reporting standards, such as CDP and CSRD, and is considered the best practice for Scope 2 reporting.

Accounting method	Description	Accuracy level
Market-based	Reflects whether companies intentionally choose to procure low-carbon electricity or not. These emissions can be calculated by using contractual agreements companies have with their electricity providers. Examples include purchase agreements of renewable energy, renewable energy certificates, or supplier-specific electricity products.	1
Location-based	Reflects the emissions the company is directly releasing into the air as a result of the use of the regional or national electricity grid. They are calculated based on the average emissions intensity of the grid on which energy consumption occurs.	2

In summary, location-based accounting gives a realistic picture of the grid's current state, while market-based accounting drives climate improvements and recognizes a company's efforts to support renewable energy generation.

To make dual-accounting fast and easy, Cozero’s methodology only requires you to input electricity data using the market-based method. Based on the electricity consumption tracked, Cozero will automatically connect your electricity consumption to the correct country or regional grid emissions intensity and calculate the location-based emissions.
As a result, you obtain two sets of emissions for the same consumption, which you can use to comprehensively report your electricity emissions.

2a. Market-based method

This method quantifies emissions based on the emissions emitted by the electricity generator from which the user contractually purchases electricity. Under this method, a company uses the emission factor associated with the contractual instruments owned. Note that these should adhere to the quality criteria as stated in the GHG Scope 2 Standard. If these contracts are not available or the instruments do not meet the quality criteria, then regional emission factors representing the residual mix are used.

For more information on this method, including contractual instruments and calculation hierarchy, please refer to the article on the market-based method.

• Activity data: quantity of electricity consumed in kWh. Cozero provides conversion for other units (e.g. MWh).
• Emission factor: derived from the contractual instruments that meet Scope 2 quality criteria, or in the absence of contractual instruments, the local residual or grid-mix.

How to report emissions in Cozero?

• Step 1: Select the category “Electricity”
• Step 2: Select the subcategory you want to report on
• Step 3: Select the calculation method that reflects your sourcing of energy
• Step 4: Select the correct activity that best represents the source of your electricity
• Step 5: Enter the amount of electricity consumed
• Step 6: Select the appropriate data quality
• Step 7: Select the country of sourcing

Cozero will automatically calculate the emissions for the quantity of electricity entered as well as Scope 3 emissions from upstream impacts and T&D losses.

2b. Note on emission factor sources

Cozero uses the emission factors published by the International Energy Agency (IEA) for the location-based and upstream electricity emissions accounting. IEA emission factors provide the most comprehensive country-specific information available, enhancing data accuracy. This allows you to make better-informed decisions about energy procurement and efficiency, leading to more precise management of your carbon footprint.
The IEA emission factors are updated every autumn, and the new data is made available in Cozero by the end of each year. Finalized IEA emission factors for each year are released in Cozero with a two-year delay. The IEA also releases provisional values for select countries with a 1 year delay, but these values will not be updated in Cozero as they are based on prior years' data and likely to change.
For example, the finalized IEA emission factors for 2023 will be published by the end of 2025. Until these final values are released, Cozero will use the finalized IEA emission factors for 2022 to calculate electricity emissions.

For market-based residual mix emission factors, Cozero utilizes annual data from the Association of Issuing Bodies (AIB). These factors reflect emissions intensity after removing energy claimed through energy attribute certificates. As much of this electricity is renewable, you may notice higher emissions values than when using the IEA location-based factors. This methodology is applied to limit double-counting of renewable energy claims between companies. In cases where a residual mix factor is unavailable, Cozero defaults to the IEA location-based emission factor.

You can learn more about the range of emission factor sources Cozero applies in this article.

2c. Calculation methods

Subcategory: Purchased or acquired electricity

The calculation methods for market-based emissions are shown below, in order of preference for highest level of precision. Companies should follow this order and use the best available method to account for their emissions.

Bundled renewable energy certificates and contracts (incl. PPA)
Cover direct power purchase agreements (PPAs) for low or zero carbon electricity sources, including renewables and nuclear energy. These sources generate zero Scope 2 emissions due to their emission-free nature. Upstream impacts for each electricity source are calculated using source-specific emission factors as modeled impacts in Scope 3. Transmission and distribution losses are calculated as modeled impacts based on upstream emission factors and country average loss rates.
Unbundled renewable energy certificates
This method can be used when a company is consuming grid electricity without a specific purchase contract, but purchases renewable energy certificates to compensate for their emissions. This method results in zero Scope 2 emissions. However, as the company is consuming grid electricity, the upstream impacts are calculated in Scope 3 as modeled impacts based on the average emissions intensity of the national grid.
Supplier specific contract
Involves emissions accounting when a company's energy supplier can provide a specific emission factor for the sourced electricity. This might not always represent renewable energy and can sometimes exceed the average grid emission factor. However, if methods 1 or 2 are not possible, companies must use this factor for market-based emissions. Scope 2 emissions are determined by the supplier-specific factor, while upstream impacts for Scope 3 are calculated as modeled impacts based on the national grid's average emissions intensity. However, if a supplier-specific upstream emission factor is available, companies can change this and use it instead.
Local electricity mix
The final market-based approach is used to track electricity consumption not covered by the previous three methods. Assuming no specific purchasing decisions, emissions are calculated based on the residual mix emission factor of the local or national grid. This factor does not account for renewable electricity in the grid already claimed by other parties, preventing double counting. Residual mix factors are not widely available, and mostly used for European countries. In the absence of such a factor, calculations revert to the location-based method using the country's average grid emission factor. Although this calculation is not using a market-based method, these emissions form a part of the total market-based emissions.That is why this option is recommended lastly and should only be used if no other method is available to you.

In addition to purchasing electricity, more and more companies are producing renewable electricity on-site through solar panels or wind turbines. This electricity generation does not cause direct emissions, but it forms an integral part of companies’ energy consumption. The share of the generated electricity that the company consumes itself should be reported separately, by using the calculation method “Self-generated renewable electricity” and activity “Self-generated renewable electricity consumption”. This approach helps the company transparently report all its energy consumption, including self-generated and purchased electricity.

Subcategory: Renewable electricity generation

Often companies don’t consume all the renewable electricity they generate, and send it back to the grid. This cannot be claimed as a benefit for carbon accounting purposes beyond the reduced use of grid electricity. However, renewable electricity generation is an important sustainability effort companies should report to their stakeholders or through reporting frameworks.
This total generation, which should include both the electricity consumed and sent back to the grid, can be tracked in the subcategory “Renewable electricity generation” by using the activity “Gross renewable electricity generation”. This calculation generates no emissions, but helps communicate the total quantity of renewable electricity that the company generated.

3) Modeled categories

In the category of Electricity, there are additional emissions relating to upstream impact from the electricity purchased and consumed. As a result, additional calculations are required. Cozero automatically calculates these emissions but we still want to give you a brief overview of what they include.

Upstream emissions of consumed electricity: Relating to the extraction, production, and transportation of fuels utilized in the generation of electricity, steam, heating, and cooling that is consumed by the reporting company.
Transmission & distribution losses: Generated electricity, steam, heating and cooling that is consumed (i.e., lost) as it passes through a T&D system.

4) Category guidance & helpful information

4a. Accounting methods: market-based vs. location-based

4b. Reporting avoided emissions

Emissions that are avoided by opting for low-carbon energy generation and use should be reported separately from the Scopes defined by the GHG Protocol. These avoided emissions represent impacts outside the GHG inventory boundaries. Avoided emissions are not necessarily equivalent to global emissions reductions from additional projects and should therefore not be used to reduce a company’s carbon footprint.

For example, if the project operates in a jurisdiction with an emissions cap on the power sector, or comes from a GHG offset, the company should not make public claims about avoided emissions. In the case of a cap, the avoided grid emissions can be zero as regulated entities may emit up to the level of the cap.
Alternatively they might already be represented in claims by the offset purchaser. Any offsets produced from the project, or any allowances voluntarily retired should therefore be reported separately.

5) Where can I find the relevant data?

Utility bills or invoices usually sourced from the accounting department, real estate department, operations managers or procurement team
Contractual instruments

To find out more about data collection, you can refer to the article about Data Sourcing.