Scope 2 location-based vs market-based under ESRS E1-6: why you report both, and what each number means

Scope 2 is the emissions from the electricity, steam, heat and cooling a company buys. Under the GHG Protocol there are two ways to measure it, and the European Sustainability Reporting Standards do not let you choose: E1-6 asks for both figures, side by side, with the total emissions shown under each. This page explains what the two methods measure, why they diverge, and what the standard says about the evidence behind the market-based one. It is Bindler's reading; the delegated regulations and the GHG Protocol Scope 2 Guidance control.

What the standard requires

Disclosure Requirement E1-6 in ESRS E1 (Commission Delegated Regulation (EU) 2023/2772) requires gross Scope 1, Scope 2, Scope 3 and total GHG emissions in tonnes of CO2e (paragraph 44). For Scope 2, paragraph 49 says the disclosure "shall include: (a) the gross location-based Scope 2 GHG emissions in metric tonnes of CO2eq; and (b) the gross market-based Scope 2 GHG emissions in metric tonnes of CO2eq." Paragraph 52 then requires total GHG emissions disclosed twice, once with the underlying Scope 2 measured location-based and once market-based, and AR 53 carries the pair through to the intensity per net revenue.

The revised ESRS adopted by Commission Delegated Regulation (EU) 2026/1563 (OJ 21 September 2026, in force 10 November 2026, applying to financial years from 1 January 2027, with early application allowed for 2026) keeps the requirement: the revised E1-6 asks for "scope 2 GHG emissions (location-based and market-based)" and its tabular format still has a row for each. So this is not a rule that the simplification removed.

What the location-based method measures

The application requirement AR 45(d) of the 2023 text defines it: the location-based method "quantifies Scope 2 GHG emissions based on average energy generation emission factors for defined locations, including local, subnational, or national boundaries." In plain terms, every kilowatt hour drawn from the grid carries the average emissions of that grid, regardless of what the company has contracted for. A site in a coal-heavy grid has a high location-based figure; a site in a hydro-heavy one a low one. Contracts, certificates and green tariffs make no difference.

This is the number that reflects physics. It moves only when the grid changes or the company uses less.

What the market-based method measures

The same AR 45(d) defines the market-based method as quantifying Scope 2 emissions "based on GHG emissions emitted by the generators from which the reporting entity contractually purchases electricity bundled with instruments, or unbundled instruments on their own", citing the GHG Protocol Scope 2 Guidance glossary. Here the contract counts. A power purchase agreement with a wind farm, a green tariff backed by Guarantees of Origin, or unbundled certificates each let the company claim the emission rate of the generation it has bought.

For electricity not covered by such an instrument, the company does not fall back to the grid average. It uses the residual mix, which the Scope 2 Guidance describes as the default factor "representing the untracked or unclaimed energy and emissions" once contractual claims have been taken out of the grid. The residual mix is higher-carbon than the grid average in markets where a lot of renewable generation has been claimed by others, which is exactly why a company that buys nothing can have a market-based figure above its location-based one.

Why the standard wants both

The GHG Protocol Scope 2 Guidance (2015) introduced dual reporting: companies with operations in markets where contractual instruments exist "shall report scope 2 emissions in two ways and label each result according to the method". Its stated reason is consistency, "so that users of GHG information can track and compare GHG emissions information over time according to the same method assumptions". ESRS E1-6 adopts the pair for the same reason. The location-based number shows the physical footprint and its trend; the market-based number shows the effect of procurement choices. A reader with only the second cannot tell a company that halved its consumption from one that bought certificates.

What a contract must prove

The market-based figure is only as good as the instruments behind it. The Scope 2 Guidance sets eight Scope 2 Quality Criteria that "all contractual instruments shall meet" to be used in the market-based method; an instrument that fails them is ignored and the residual mix applies. ESRS E1-6 adds disclosure: AR 45(d) requires the undertaking to "provide information on the share and types of contractual instruments" used, and the company "may disclose the share of market-based scope 2 GHG emissions linked to purchased electricity bundled with instruments such as Guarantee of Origins or Renewable Energy Certificates." The same conservative approach carries into E1-5 on energy: purchased energy counts as renewable only if its origin is clearly defined in the contractual arrangement with the supplier.

Two exclusions apply to both methods. AR 45(f) says Scope 2 shall "not include any removals, or any purchased, sold or transferred carbon credits or GHG allowances". Offsets never reduce Scope 2 under either method. And AR 45(c) requires avoiding double counting with Scope 1 or 3: the upstream emissions of generating that electricity (transmission losses, well-to-tank fuel) sit in Scope 3 category 3, not here.

What this looks like in a report

Two Scope 2 lines, two total lines, two intensity lines, and a note stating the share of consumption covered by contractual instruments and their type. If the market-based figure is lower than the location-based one, the difference is the quantity the contracts have bought. If it is higher, the residual mix is doing the work, and the company should say so rather than switch methods.

Running your own sites

The free Scope 2 calculator gives the location-based and market-based pair for one site from a grid factor, the contracted share and the residual mix, the two figures E1-6 paragraph 49 requires. The GHG Protocol Scope 1, 2 and 3 Inventory Workbook ($29, /ghg-inventory/) carries both methods across every site, with the DESNZ 2025 factors cited by ID, the contractual instruments register and a Summary sheet that totals location-based and market-based separately, as the standard's table does. Team and consultancy licences are $119 and $249. Scope 3 is covered in the Scope 3 template guide.

Sources

• Commission Delegated Regulation (EU) 2023/2772 (ESRS), ESRS E1 Disclosure Requirement E1-6 paragraphs 44, 49 and 52, and application requirements AR 45(c), (d) and (f), AR 47 and AR 53: eur-lex.europa.eu/eli/reg_del/2023/2772/oj. Read from the Publications Office text (CELEX 32023R2772).
• Commission Delegated Regulation (EU) 2026/1563 of 3 July 2026 amending Delegated Regulation (EU) 2023/2772 as regards the simplification of certain sustainability reporting standards, OJ 21 September 2026, Article 3 (entry into force 10 November 2026, application from financial years beginning on or after 1 January 2027): eur-lex.europa.eu/eli/reg_del/2026/1563/oj. The revised E1-6 text as published by the Commission with the adopted act: ec.europa.eu/finance/docs/level-2-measures/csrd-delegated-act-2026-5010-annex_en.pdf.
• GHG Protocol, Scope 2 Guidance (2015), sections 1.5.1 (dual reporting), 1.5.2 (Scope 2 Quality Criteria) and the definition of the residual mix: ghgprotocol.org/scope-2-guidance.

Last checked against the sources on 28 September 2026.