Market-based method

“A contract can change the attribute a company claims. It does not by itself change the electricity flowing to the building. ”

The market-based method was created to reflect consumer choices in electricity markets where contractual instruments convey generation attributes. Supplier-specific emission rates, power purchase agreements, guarantees of origin and renewable energy certificates may be used when they meet quality criteria. The method is frequently interpreted as a physical tracing system. It is not.

Electricity is pooled through grids, and the electrons delivered to a facility cannot usually be assigned to a particular generator. The method accounts for contractual claims to attributes, not a dedicated physical flow. That distinction explains why quality controls matter. Attributes should be unique, retired, geographically and temporally relevant, and assigned without double counting.

Where contractual information is unavailable, residual-mix or other specified factors may be required rather than a generic grid average. A lower market-based total can show a procurement choice, but it should not automatically be described as grid decarbonisation or avoided emissions. The climate effect depends on whether procurement caused additional clean generation, changed dispatch or influenced investment.

Attribute ownership and causal impact are related but different questions. The GHG Protocol’s dual-reporting approach asks many organisations to disclose both market-based and location-based figures. The difference is informative: one reflects procurement instruments; the other reflects the average grid where consumption occurred.

For practitioners, the method should support better purchasing while preserving transparency.

The strongest reports explain energy consumed, instruments used, quality criteria, residual mix and the role of procurement in the wider transition.

Practical application

Maintain a certificate and contract ledger showing technology, geography, generation period, retirement and ownership. Report market-based and location-based totals side by side and distinguish attribute claims from claims of additional emissions reduction.

Why it matters

The method gives visibility to procurement choices. Without quality and causal clarity, it can produce large reported reductions with limited change in the electricity system.

Common misconception

Market-based Scope 2 proves that the facility operated on renewable electricity. It proves ownership of qualifying attributes under the method, not physical delivery of particular electrons.

Connections

Scope 2 introduces dual reporting. Location-Based Method shows grid-average exposure. Additionality tests whether procurement caused change beyond business as usual.

A question worth asking

What changed in the electricity system because of your procurement—and what changed only in your accounting claim?

Selected references

GHG Protocol, Scope 2 Guidance. GHG Protocol, Scope 2 Quality Criteria. International Energy Agency, corporate clean-energy procurement guidance.