Location-based vs market-based emissions: what is the difference?
Location-based and market-based are the two GHG Protocol methods for Scope 2: grid-average emissions versus emissions from contracted energy.
Why it matters
The location-based method uses the average emissions intensity of the grid where electricity is consumed. The market-based method reflects contractual choices, such as renewable energy certificates and other energy contracts. The GHG Protocol Scope 2 Guidance sets quality criteria those instruments must meet.
The two figures can differ a lot. A market-based figure can fall when a company buys certificates, even though the grid supplying its electricity is unchanged. A location-based figure moves only when consumption, region or timing changes, which ties it to the choices engineers make about where and when workloads run.
An example
A company running its own data centre buys certificates covering its electricity part way through the year. Its market-based Scope 2 figure drops after the purchase. Its location-based figure stays level, and falls only if it uses less electricity, moves work to a cleaner region or runs it at cleaner hours.
How Greenpixie measures it
Greenpixie reports usage emissions on a location-based basis, by cloud region and hour. Its grid factors are averages for each grid area, built from published generation data and emission factors. Hourly figures are used where grid data allows, with longer averages as fallbacks.
The methodology states they should not be presented as market-based factors, nor combined with renewable energy certificates, guarantees of origin or power purchase agreements to produce a market-based figure. They should also not be used to estimate the effect of a change in demand on a grid, which needs a marginal factor Greenpixie does not produce.