Scope 2 - Indirect emissions from purchased energy

According to the GHG Protocol, Scope 2 emissions must be calculated in two ways:

The location-based method shows the average emission factor for electricity in the country or region where consumption takes place, regardless of purchasing agreements. Emission factors are typically sourced from the IEA or NVE and are based on the actual production mix delivered into the power grid.

Here in Norway, the share of renewable electricity is higher than, for example, in Poland, where coal power is widely used. The Norwegian location-based factor is therefore lower than the Polish factor; as of 2024, the Norwegian factor is 11.9 gCO₂e/kWh (source: NVE).

The location-based method provides a good picture of how climate-intensive the electricity is in the area where the company operates. Year-to-year changes are mainly due to variations in the production of renewable energy, fossil energy, nuclear power, and other energy sources.

The market-based method takes into account electricity contracts and the purchase of guarantees of origin. Norway is connected to the European power grid, with significant cross-border electricity exchange. Both companies and private individuals can choose whether to purchase guarantees of origin for their electricity consumption. Such guarantees are a support scheme for renewable electricity producers and ensure that the electricity purchased is guaranteed to be renewable.

Emission factors are typically sourced from AIB/NVE and are based on the European residual mix. Under the market-based method, electricity emissions are calculated in two different ways. If guarantees of origin are held, the emission factor for electricity consumption is set to 0 gCO₂e/kWh, as there are no direct emissions from the production of electricity since it is renewable (Scope 2). If guarantees of origin are not purchased, this method requires the use of an emission factor based on electricity that is not produced from renewable sources (also known as the “residual mix”). The Norwegian residual mix factor for 2024 is 535 gCO₂e/kWh (source: NVE).

The market-based method therefore reflects the share of renewable energy that is not documented through the purchase of guarantees. The residual mix contains a higher share of fossil energy as more renewable energy is purchased and “removed” from the mix. This method does not represent the physical electricity delivered to a building or country, but rather illustrates how a company’s purchasing choices affect reported emissions.

When greenhouse gas accounts are prepared in accordance with the GHG Protocol, this results in two different figures that may differ significantly. Both must be reported, but they must not be summed. When reporting climate impact, it is common to present a climate account based on one of the methods and include a paragraph explaining how emissions appear when calculated using the other method.

The two methods serve different purposes: the location-based method encourages companies to locate factories and similar operations in countries where electricity is produced from renewable sources, while the market-based method encourages the purchase of guarantees of origin.

How are emissions reported?

When preparing greenhouse gas accounts in accordance with the GHG Protocol, both methods must be used.

When aggregating Scope 1, 2, and 3 emissions, one may choose the main method to be used in the climate account (e.g. Scope 1 + market-based Scope 2 + Scope 3). The other method must be presented separately.

It is important that the methods are used separately and not added together.

Energy from the combustion of biomass (pellets, biodiesel, etc.)

If you receive energy from biomass that is combusted by a supplier, emissions of CH₄ and N₂O must be reported in Scope 2, while CO₂ emissions are classified as biogenic emissions and reported separately from the main climate account (see https://ghgprotocol.org/scope_2_guidance, section 6.12).

District heating

District heating is an energy-flexible, water-based system that utilizes renewable surplus energy, often from local resources such as biofuels, waste, and excess heat from industry. This ensures reuse of raw materials that would otherwise be wasted, which is important for the transition to a more circular economy and the reduction of greenhouse gas emissions. The use of district heating also relieves the electricity grid and has over many years contributed to the phase-out of fossil energy use in buildings and industry.
(source: https://www.statkraft.no/var-virksomhet/fjernvarme/)

We recommend using local emission factors for district heating where available. This local emission factor is appropriate to use for both the location-based and market-based methods. Unfortunately, there is no publicly available national emission factor for district heating in Norway.

District heating is generally not transmitted over long distances, such as between countries or continents. The size of systems varies from serving just a few houses to entire cities (such as Stockholm).

There is discussion about guarantees of origin for district heating, but Norway has not yet implemented the EU Renewable Energy Directive, and therefore does not yet have guarantees of origin for district heating. In countries that have implemented Renewable Energy Directive II, such as Sweden and Finland, guarantees of origin for district heating do exist.

Energy from self-produced renewable electricity (e.g. rooftop solar panels)

When producing electricity yourself, NVE can issue guarantees of origin for this electricity. These guarantees can then be used for your own share of electricity consumption to apply a factor of 0 gCO₂e/kWh under the market-based method. Any remaining guarantees of origin (for surplus electricity) can be sold on the market. Note: these rules are as of November 2020 and may change with the introduction of a new Renewable Energy Directive.

For the location-based method, there is no definitive guidance for such electricity, but Emisoft recommends using a factor of 0 gCO₂e/kWh for emissions from self-produced renewable electricity, as no fossil combustion is involved in the electricity generation itself.

Link to Scope 3

Grid losses and emissions associated with, for example, the construction and operation of hydropower plants fall under Scope 3, category 3: emissions related to energy production, and must not be reported in Scope 2.

For some Scope 3 categories, emissions from energy must also be reported (for example, if the company reports emissions from franchises or buildings it has invested in). In such cases, one may choose whether to report using the location-based or market-based method, but the chosen method should be stated in the reporting (see https://ghgprotocol.org/scope_2_guidance, Appendix B).