First off, what are Scope 2 emissions? They are the carbon emissions associated with all purchased electricity. Unlike Scope 1 direct emissions and Scope 3 indirect emissions, which can include a variety of emission sources, Scope 2 emissions focus on emissions associated with the electricity sector.

There are two approved methodologies for calculating and reporting Scope 2 carbon emissions:

1. The location-based method reflects average emissions based on the intensity of the energy grid where consumption takes place.
2. The market-based method reflects emissions from electricity that companies have chosen so there is a hierarchy of emission factors. This includes contractual instruments such as energy bundled with energy attribute certificates (EACs), supplier-specific emissions factors, and default emission factors from the unclaimed or untracked energy and emissions, also known as residual mix.

Companies reporting their Scope 2 emissions can choose which of the two methods they want to use as their primary reporting methodology.

How to reduce Scope 2 emissions?

With the introduction of market-based Scope 2 accounting, companies have the opportunity to take actions to reduce their Scope 2 emissions and not depend solely on the local utility to take action. A few common strategies for companies tackling their Scope 2 emissions include:

• Implementing energy efficiency projects that not only reduce carbon emissions but also provide cost savings to the organization’s bottom line. Learn more about using a marginal abatement cost (MAC) curve [2] to approach projects in a systematic and efficient way.
• Switching to renewable energy through a long-term power purchase contract, a utility program, or onsite generation.
• Purchasing Energy Attribute Certificates (EACs) such as Renewable Energy Certificates (RECs), Guarantee of Origins (GOs), International RECs (I-RECs), or other country or region specific certificates. EACs are issued with the production of renewable energy and these documents are used and retired to prove renewable energy consumption.
• Requesting supplier-specific emissions factors, which enables the local utility or energy provider to report their above-average energy portfolio mix as compared to the default regional emissions factors.
  

A less common strategy when planning for Scope 2 emissions reductions is to factor in the expected energy mix and associated emission factors based on a region’s future utility grid plans. To understand this strategy, non-utility companies need to understand that each region’s energy regulators require long-range integrated resource planning (IRP) for energy producers and/or local utilities in their regions. [3] The specific time horizon varies by jurisdiction but the most common planning horizon is 20 years. IRP include detailed near-term plans and updates are made every few years. Companies deploying strategies to reduce Scope 2 emissions should take advantage of these long-range IRP processes when considering capital investments for expansion into new markets or retrofits into existing facilities as well as when building out mitigation strategies for decarbonizing Scope 2 emissions.

This last emerging strategy that considers regulatory processes and regional grid changes can benefit most from engaging a dynamic technology platform that can aggregate and include market information such as IRP to support an organization’s scenario planning for emissions reduction. Contact SINAI Technologies today to discuss your decarbonization goals and request a demo.

References

1. GHG Protocol. “Scope 2 Guidance: An amendment to the GHG Protocol Corporate Standard. Executive Summary.” https://ghgprotocol.org/sites/default/files/Scope2_ExecSum_Final.pdf.
2. Sinai Technologies Blogs. “Carbon and Cash-Flow Statements Built with MAC Curves.” https://www.sinaitechnologies.com/post/carbon-and-cash-flow-statements-built-with-mac-curves.
3. AEE (2015). “Understanding IRPs: How Utilities Plan for the Future”. https://blog.aee.net/understanding-irps-how-utilities-plan-for-the-future.