The difference between location-based vs market-based Scope 2 is what each method treats as the source of your electricity. The location-based method uses the physical grid you are connected to. The market-based method uses the contracts and certificates you hold.
Key points
- Location-based uses the average emissions intensity of the grid where electricity is consumed
- Market-based credits eligible certificates and applies a residual mix factor (0.81 kg CO2-e per kWh for 2025-26) to the rest
- NGER requires location-based reporting above 20,000 kWh of purchased or acquired electricity per facility
- NGER market-based reporting is voluntary but, from 2025-26, applies to every facility in the group once chosen
- AASB S2 paragraph 29(a)(v) requires location-based Scope 2 and relevant contractual instrument information
- The GHG Protocol requires dual reporting and has consulted on revisions to both methods
How the location-based method works
The location-based method applies the average emissions intensity of the grid where the electricity is consumed. Under the NGER Scheme, a grid-based emission factor from the NGER Measurement Determination for that reporting year is applied to the quantity of electricity purchased, acquired or lost from that grid by the facility. DCCEEW also publishes factors each year in the National Greenhouse Accounts (NGA) Factors for wider use, but states that the NGA Factors should not be used for NGER reporting. Buying renewable certificates does not change a location-based figure.
How the market-based method works
The market-based method subtracts eligible renewable energy certificates from the electricity that is not considered renewable, then multiplies the remaining residual electricity by the residual mix factor. Under NGER, the eligible instruments are large-scale generation certificates (LGCs), Renewable Electricity Guarantee of Origin (REGO) certificates and GreenPower bought from an accredited provider. Small-scale technology certificates and international RECs are not eligible. The residual mix factor for 2025-26 is 0.81 kg CO2-e per kWh and applies to every facility using the method, whether or not it is connected to the main grid.
What Australian reporting requires
| Framework | Location-based | Market-based |
|---|---|---|
| NGER | Mandatory for a facility that consumes more than 20,000 kWh of purchased or acquired electricity in the year | Voluntary (section 7.4 of the NGER Measurement Determination). From 2025-26, choosing it for one facility means reporting it for every facility in the controlling corporation’s group, with no minimum threshold |
| AASB S2 | Required under paragraph 29(a)(v) | Not required. Information about contractual instruments is required only where they exist and help users understand Scope 2 emissions |
| GHG Protocol Scope 2 Guidance (2015) | Required | Required alongside location-based (dual reporting) |
Why it matters for asset-intensive operations
A market-based figure is not zero by default. In the Clean Energy Regulator’s own 2025-26 example, a Queensland facility consuming 11,000,000 kWh with no certificates reports 7,369 t CO2-e of market-based Scope 2. Allocating 3,100 MWh of LGCs and GreenPower reduces it to 4,858 t CO2-e.
Electricity that is exempt from the Renewable Energy Target liability, including under emissions-intensive trade-exposed (EITE) exemption certificates, is treated separately in the market-based formula. Facilities with EITE activities have to estimate and evidence that exempt quantity.
Every certificate claim needs evidence. LGCs must be voluntarily surrendered before the NGER report is submitted, carry a generation date within 36 months of the end of the reporting year, and be claimed only once. Surrender IDs, serial numbers and GreenPower statements must be kept.
The Clean Energy Regulator cautions that the two totals are distinct methods and are not intended to be compared with each other.
What is changing
The GHG Protocol consulted on revisions to its Scope 2 Guidance from 20 October 2025 to 31 January 2026. The proposals keep dual reporting but introduce hourly matching and deliverability requirements for market-based claims and a more precise emission factor hierarchy for location-based figures. Each reporting year should be assessed against the rules in force for that year.
References & sources
Primary regulatory documents and authoritative references underpinning this answer.
- Clean Energy Regulator: Voluntary market-based scope 2 emissions guideline (July 2026)cer.gov.au
- AASB S2 Climate-related Disclosures (September 2024)standards.aasb.gov.au
- GHG Protocol Scope 2 Guidance (2015)ghgprotocol.org
- GHG Protocol: Overview of proposed Scope 2 revisionsghgprotocol.org
- DCCEEW: National Greenhouse Accounts Factors 2025dcceew.gov.au
- Clean Energy Regulator: Estimating emissions and energy from electricity production and consumption guidelinecer.gov.au