Business Energy Glossary
What are Scope 2 emissions?
Scope 2 emissions are the indirect greenhouse gas emissions from the generation of purchased electricity, heat, steam, and cooling consumed by an organisation. For most UK businesses, Scope 2 is dominated by purchased grid electricity. Although the emissions occur at the power station (not the consumer site), they are attributed to the consumer because the consumption drives the generation. Scope 2 has been declining in the UK as the electricity grid has decarbonised, falling from around 500 gCO2/kWh in 2000 to around 200 gCO2/kWh in 2024.
Scope 2 reporting is required for SECR and most climate disclosure frameworks. The choice between location-based and market-based Scope 2 reporting affects what counts toward net zero claims and shapes corporate decisions on green tariffs, REGOs, and PPAs.
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What counts as Scope 2
Scope 2 emissions are the indirect emissions from electricity, heat or steam a business buys. They’re calculated from your metered electricity use, so both consumption and tariff type, including REGO-backed supply, affect the figures you report.
For the full explanation, see ESOS vs SECR explained.
The Greenhouse Gas Protocol Scope 2 Guidance defines Scope 2 as emissions from purchased:
- Electricity.
- Heat (district heating).
- Steam.
- Cooling (district cooling).
The emissions occur at the generator (power station, heat network plant, etc.) but are attributed to the consumer because the consumption drives the generation. The boundary is the meter: emissions on the upstream side are Scope 2 for the consumer.
Common UK Scope 2 sources
| Source | Typical Scope 2 share |
|---|---|
| Grid electricity | Dominant share (often above 90%) for most UK businesses |
| District heating | Material for some London and city-centre buildings |
| District cooling | Material for very few UK businesses (more common in tropical climates) |
| Purchased steam | Material for some industrial sites within heat networks |
For typical UK office, retail, and warehouse operations, Scope 2 means grid electricity, full stop. Heat and steam matter for sites connected to a district network.
Location-based vs market-based
The GHG Protocol Scope 2 Guidance requires reporting both metrics:
- Location-based Scope 2. Calculated using the average emissions intensity of the grid where the consumption occurs (e.g. UK average grid intensity). Reflects the physical reality of the electricity system.
- Market-based Scope 2. Calculated using contractual instruments allocated to the organisation, including REGOs, green tariff allocations, and PPAs. Reflects the contractual claim to specific generation.
A business on a green tariff backed by REGOs has zero market-based Scope 2 but non-zero location-based Scope 2. Both metrics are reported; net zero targets typically focus on the market-based metric.
Calculating Scope 2
The location-based calculation:
Location-based Scope 2 = electricity consumption (kWh) × grid intensity (kgCO2/kWh)
For UK businesses, the DESNZ annual emission factor publication provides the grid intensity to use. DESNZ publishes the UK grid factor each year, so always use the set for your reporting year (the 2024 figure was about 0.207 kgCO2e per kWh).
The market-based calculation:
Market-based Scope 2 = (consumption – REGO-backed kWh) × residual mix intensity
REGO-backed consumption is treated as zero-emission for market-based purposes. Non-REGO consumption is multiplied by the residual mix intensity (the average intensity of the grid after REGO-backed generation is allocated to its claimers).
Reducing Scope 2
Common levers:
- On-site generation. Solar PV, CHP, and other on-site sources reduce purchased electricity.
- Energy efficiency. LED lighting, HVAC controls, building management systems, motor controls.
- Green tariffs with REGOs. Reduces market-based Scope 2 to zero for the supplied portion.
- Corporate PPAs. Long-term renewable supply contracts; bundled REGOs zero out market-based Scope 2.
- Demand-side response. Shifting consumption to lower-intensity grid hours (where reported).
Most credible net zero strategies combine multiple Scope 2 levers, with grid decarbonisation providing structural reduction over the long term.
Scope 2 in reporting
UK frameworks requiring Scope 2 reporting:
- SECR (location-based mandatory; market-based recommended).
- CDP (both location and market-based required).
- Science-Based Targets (both required; market-based usually basis for targets).
- Climate-related Financial Disclosures (required for listed and large companies).
The dual reporting requirement is intentional: location-based reflects the physical grid; market-based reflects the contractual claim. Both perspectives are useful for understanding the carbon impact of electricity use.
Scope 2 emissions FAQs
What are Scope 2 emissions?
Indirect greenhouse gas emissions from the generation of purchased electricity, heat, steam, and cooling. For most UK businesses, Scope 2 means grid electricity emissions, attributed to the consumer because the consumption drives the generation.
How is Scope 2 different from Scope 1?
Scope 1 is direct emissions from owned sources (e.g. gas burned in your boiler). Scope 2 is indirect emissions from purchased energy (e.g. electricity generated at a power station). The same activity (e.g. heating) can be Scope 1 (gas) or Scope 2 (electric).
What is location-based Scope 2?
Calculated using the average emissions intensity of the grid where the consumption occurs (e.g. UK average). Reflects the physical reality of the electricity system regardless of contractual arrangements.
What is market-based Scope 2?
Calculated using contractual instruments allocated to the organisation, including REGOs, green tariffs, and PPAs. REGO-backed consumption is treated as zero-emission for market-based purposes.
How is UK Scope 2 calculated?
Multiply electricity consumption in kWh by the UK grid emission factor (around 0.207 kgCO2e per kWh in 2024, location-based). DESNZ publishes the factor annually.
Do green tariffs reduce Scope 2?
Green tariffs reduce market-based Scope 2 (because REGOs are allocated to the consumption). They do not reduce location-based Scope 2 (because the physical grid intensity is the same regardless of contractual arrangements). Most net zero targets use market-based.
Does on-site solar reduce Scope 2?
Yes. On-site solar reduces purchased electricity, which reduces both location-based and market-based Scope 2 directly. This is the strongest form of Scope 2 reduction because it removes physical demand from the grid.
What is the typical Scope 2 share of UK business emissions?
Highly variable. For office and retail businesses with minimal Scope 1, Scope 2 can be 80 to 95 per cent of operational emissions. For manufacturing with substantial gas use, Scope 2 may be 20 to 40 per cent of operational emissions.