GHG Protocol Scope 2 Guidance Revision
The GHG Protocol is revising its Scope 2 Guidance to improve the accuracy, clarity, and comparability of electricity-related emissions reporting, with direct implications for how organisations approach electricity procurement, renewable energy claims, and Scope 2 accounting. The proposed updates affect both location-based and market-based calculation methods.
Key changes include clearer definitions, enhanced emission factor hierarchies, hourly time-matching and local sourcing requirements for Energy Attribute Certificates (EACs), and updated measures to reduce double counting across reporting methods. These changes, currently under public consultation, will be phased in (subject to finalisation) from late 2027 / 2028 and will require organisations to reassess their energy procurement strategies, emissions reporting methodologies and decarbonisation strategies.
The introduction of the proposed changes to the GHG Protocol will have practical and cost implications throughout the global sustainability and energy markets.
Consultation and Implementation Timeframes
The proposed Scope 2 changes are open for public consultation until 31 January 2026, with the revised Standards set to be finalised in 2027 and 2028.
The implementation of the changes will be phased, facilitating a suitable transition to the new requirements. This transition period will allow organisations time to adapt and develop processes in line with the updated Standards.
Location-Based and Market-Based Reporting
The location-based method reports electricity emissions (kg/CO2e) within a defined geographical boundary and uses the average emissions intensity of the local grid. This is generally reported at a country or state level. For example, the national grid for the United Kingdom or state grid for California.
The market-based method reports the electricity emissions (kg/CO2e) associated with the electricity procurement decisions of a reporting entity. This method uses the emission factor from qualifying contractual instruments, typically the selected electricity supplier, purchased bundled and unbundled Energy Attribute Certificates (EACs), or Power Purchase Agreements (PPAs). This approach enables companies to report zero emissions where 100% renewable electricity has been purchased in the name of the company.
What are the Proposed Changes?
Definitions
- Proposed Change - Updates to the definitions of Scope 2 emissions, location-based method and market-based method.
- Impact - This will provide clearer boundaries for calculation methods, reducing interpretation differences and improving consistency across reports.
Emission Factor Hierarchy
- Proposed Change - A structured emission factor hierarchy will be introduced, considering spatial boundaries and temporal granularity. This will include local versus national boundary spatial data, and hourly-matched versus annually matched temporal data.
- Impact - The hierarchy will ensure that organisations consistently use the most appropriate and precise emission factor data available, improving the accuracy of location-based method reporting across inventories.
Accessibility of Emission Factors
- Proposed Change - A new concept of accessibility for emission factors has been proposed.
- Impact - Providing a definition of what constitutes โaccessibleโ emission factors will reduce ambiguity around which data sources are considered reliable and suitable for reporting purposes.
Hourly-matched EACs
- Proposed Change - Requirement for purchased EACs to be hourly matched to electricity consumption.
- Impact - This approach will require EACs to be generated and retired for the consumption they are covering on an hourly basis.
EACs from Local Grids
- Proposed Change - EACs purchased will need to be generated from sources that are locally available to the organisationโs location following more market boundary requirements.
- Impact - More stringent requirements to demonstrate the physical delivery of renewable electricity to ensure issued EACs are directly covering facilities making renewable electricity claims.
Standard Supply Service
- Proposed Change - Defining how Standard Supply Service (SSS) is allocated between customers.
- Impact - This will ensure that renewable energy is allocated fairly and that renewable claims correspond to customersโ actual share of supply.
Residual Mix (Market-based Emissions)
- Proposed Change - Updated definition of residual mix emission factors.
- Impact - This will reduce double counting and duplication across reporting methods.
Fossil-based Emissions
- Proposed Change - A new requirement to use fossil-based emission factors where data is not matched with contractual instruments or a residual mix.
- Impact - By not relying on national grid averages, this will encourage a more conservative approach to emissions accounting.
The most significant impact areas for companies (market boundaries and hourly time-matching EACs) are highlighted below.
Market Boundaries
Under the proposed changes, Energy Attribute Certificates (EACs) sourced from generating facilities will be required to fall within the same deliverable market boundary as the demand to which they are being applied. This means that electricity from a generator could plausibly form part of the mix serving the reporting entity through an electrically connected grid.
In the United States, exact grid regions will be defined in due course. As an example, this approach will likely see a shift from the ability of companies with facilities in New York to purchase RECs from cost-efficient renewable energy generators in Texas (or general Renewable Electricity Certificate (REC) trading and retiring across the US and Canada as one combined market).
In Canada, provincial and territorial electricity grids as defined by the Canada Electricity Regulator will be applied.
In Europe, the electricity market operated by the European Network of Transmission Systems Operators for Electricity (ENTSO-E) will apply. Again, this will potentially see a reduction in the ability to purchase and retire Guarantees of Origin (GO) from across the continent, due to more stringent requirements for market boundaries and grid connections.
For companies with renewable energy strategies such as Virtual Power Purchase Agreements (VPPAs) or bundled and unbundled EACs, the purchased renewable electricity will be required to originate from the same market where the energy is consumed or demonstrate physical grid connection between generation and demand.
Hourly Time-Matching EACs
For market-based reporting which showcases the use of Energy Attribute Certificates (EACs), the proposed measures will mandate that EACs are generated, issued, and retired for the same hour as energy consumption.
Under current annual / monthly matching arrangements, it is only required that EACs are generated within the same calendar year as the associated consumption.
As time-matching EACs is generally within the early stages of development for most major markets, this marks a very significant increase in requirements and expectations. Companies entering into Power Purchase Agreements (PPAs) with asset-specific generators will be required to request and report hourly generation data associated with those projects.
Current responses from across the energy industry highlight the market maturity in this area as a serious barrier in being able to roll-out hourly time-matched EACs at scale by 2027 / 2028.
Compliance Thresholds
Exemption thresholds are being considered to exempt organisations (based on company size and / or electricity consumption volume) from the requirement to comply with hourly time-matching.
For organisations without access to hourly data, load profiles may be used to approximate hourly consumption based on monthly or annual data.
Grandfather / Legacy Clauses
A legacy clause is under consideration to allow current pre-existing contracts to be recognised once the new Standards are published and finalised.
This would enable organisations to continue using EACs from existing agreements such as PPAs and long-term unbundled EAC strategies, even if they do not meet the proposed hourly matching and deliverability requirements, ensuring a suitable transition and preventing pre-existing agreements from becoming invalid.
Taking Action in 2026
While the wording and specific requirements for key changes to the GHG Protocol is still subject to clarification, the proposed changes will result in applicable organisations approaching strategic obstacles (and opportunities) throughout the next couple of years. The overall progression towards improved location and market-based reporting, stringent market boundaries and hourly-matched EACs as standard practice will place sustainability compliance as a vitally crucial factor in any procurement decision.
In light of the above draft proposals under consultation, companies may need to reconsider their renewable supply contracts, EAC strategies and PPA plans to ensure alignment with the revised requirements set out in the forthcoming Standard.
Broader Sustainability Compliance
Proactive organisations should now start to address how the proposed changes will directly impact electricity decarbonisation goals in a way that complies with the GHG Protocol (with other leading standards such as the SBTi, CDP and RE100 generally applying the minimum quality criteria of the GHG Protocol).
Prior to the GHG Protocol changes coming into force, companies can take action in 2026 to implement long-term renewable electricity procurement plans which meet the current requirements and will be acceptable as part of legacy clauses.
How NUS Can Help
NUS provides industrial and commercial organisations around the world with bespoke electricity decarbonisation strategies to reduce Scope 2 emissions in accordance with the latest leading international standards.
If you wish to speak further about areas on how the proposed changes will impact your organisation and current / developing electricity decarbonisation strategies, contact: contact@nusconsulting.co.uk or contact us online.