Navigating Emission Calculation: Location-Based vs. Market-Based Method
Welcome to this week’s Key Climate Insights, from our CHOICE Event #64 with Robert Werner, CEO of greenmiles, and Yasha Tarani, Founder of The Climate Choice.
Together, we delve into the critical data aspect in emission calculations – and specifically the dynamic interplay between location-based and market-based methods when calculation Product Carbon footprints (PCF). Curious? Dive deep to learn how to navigating the complexities of emission calculation and overcome the data gap.
Watch the Live CHOICE Event #64
Key Climate Insights
Renewables as a Competitive Advantage for whole Nations
- Renewables in the energy mix are a competitive advantage for entire nations, exemplified by Norway’s high share of renewable energy.
- Over 95% of electricity production in the mainland Norway is from hydropower plants, allowing companies to showcase almost negligible emissions in Scope 2, using the location-based method.
GHG Protocol and Emission Calculation Methods
- The GHG Protocol provides guidelines for organizations to measure and manage greenhouse gas emissions, and updated its guidance on Scope 2 recently.
- It offers two primary methods for calculating emissions in Scope 2: location-based and market-based.
- Following the GHG Protocol Definition: A location-based method reflects the average emissions intensity of grids on which energy consumption occurs (using mostly grid-average emission factor data). A market-based method reflects emissions from electricity that companies have purposefully chosen (or their lack of choice).
Challenges – Double Accounting & Lack of Comparability
- In the example of Norway, a heavy producer of renewable energy, the country sells its production in the form of Guarantees of Origin (GOs) under the EU Renewable Energy Directive.
- Companies purchasing these GOs (e.g., in Germany) employ the market-based method in their PCF calculation in Scope 2, resulting in minimal emissions. While the companies in Norway employ a location-based method and also show almost no emissions in Scope 2.
- This introduces the risk of double accounting and complicates the comparability of emission calculations, especially of PCFs.
Challenges and Guidelines on Data Credibility
While the GHG Protocol provides guidance on the usage of location-based and market-based methods, those are not binding. And often it seems as if every company takes another approach. Especially when you gather supplier specific data, the challenge of missing credibility arises.
Lack of clear guidance on when to use location-based vs. market-based calculation methods poses a hurdle for organizations, when using emission data to compare companies or their products.
Robert Werner, greenmiles
Quick Guide on Supply Chain Emissions – here in the CLIMATE Magazin.
Challenges:
- Potential for large-scale double accounting due to the trade of renewable energy.
- Non-comparable supplier PCFs and a lack of credible supplier climate data.
- Need to assess not just CO2 numbers, but the methods leading to these figures and the contextual factors.
Conclusion:
- The complexities arising from the choice between location-based and market-based emission calculation methods, highlight the need for granular supplier data including the calculation method.
- As the world transitions to a low-carbon economy, addressing these challenges in standartization guidelines becomes paramount for ensuring transparent, comparable, and credible data.
- Be transparent about the data methods you use, and gather precise primary climate data of your suppliers to improve the credibility of your own calculations and business decisions.
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