ESG glossary
Location-based vs market-based emissions
Location-based and market-based are two ways of calculating Scope 2 electricity emissions. Location-based uses the average carbon intensity of the national grid. Market-based reflects the electricity you have chosen to buy, such as a certified renewable tariff.
Electricity from the grid is physically the same whoever supplies it. But businesses can buy contracts and certificates that say their electricity came from renewable sources. The GHG Protocol Scope 2 guidance handles this by asking companies to report Scope 2 emissions two ways.
What it means for a small business
- Location-based multiplies your kWh by the average UK grid factor from the government’s conversion factors. It shows the emissions from the grid where you actually use power, regardless of your tariff.
- Market-based uses the emission factor of the electricity you have contracted to buy. If your tariff is backed by REGO certificates for 100% of your use, your market-based Scope 2 is zero. If not, you use your supplier’s published fuel mix or a residual factor.
UK government reporting guidance asks for the location-based figure, with market-based as an optional extra. Reporting both is good practice, and it stops anyone accusing you of hiding behind your tariff.
An example
A small office uses 15,000 kWh a year on a 100% REGO-backed renewable tariff.
- Location-based: 15,000 × about 0.13 kg = roughly 2.0 tCO2e
- Market-based: 0 tCO2e
The business should report both, explaining that its market-based figure reflects a renewable tariff. If it then cuts electricity use by 20%, the location-based figure shows the improvement clearly.
How ESG Now handles it
The ESG Now questionnaire asks whether you are on a renewable tariff, and the report shows Scope 2 both location-based and market-based. A renewable tariff backed by REGOs counts as zero in the market-based figure. See the methodology for the factors used.
Guides that cover this
- Carbon footprintScope 1, 2 and 3 emissions explained for small businessesScope 1 is fuel you burn, Scope 2 is electricity you buy, Scope 3 is everything else. Here is how each one applies to a real small business.Read the guide →
- Carbon footprintThe carbon footprint of an office-based businessFor most offices, heating and electricity make up the bulk of the footprint, and you can estimate both from floor area if you don't have the bills.Read the guide →
- Carbon footprintHow to calculate your small business carbon footprintMultiply what you use by the official UK factors and add it up. Here is exactly what to measure, a worked example, and what to do when you are missing a bill.Read the guide →