Scope 2 emissions are the greenhouse gases your company produces indirectly by using purchased electricity, steam, heating, or cooling
Unlike Scope 1 emissions, which come directly from sources you own or control (like a company vehicle or factory furnace), Scope 2 emissions happen at a power plant or district energy facility somewhere else. When you flip a light switch or run an air conditioner, you are not burning fuel yourself — but the utility company burning fuel to generate that electricity is producing emissions on your behalf. Those emissions count as Scope 2.
The distinction matters because it changes how you measure and report. You do not measure the fuel burned at the power plant. Instead, you measure how much electricity, steam, or heating you purchased, then multiply that by an emissions factor — a number that tells you how many kilograms of carbon dioxide equivalent were produced per unit of energy. The emissions factor varies by region, fuel mix, and utility, so the same kilowatt-hour produces different Scope 2 emissions in California than in West Virginia.
Key Takeaways
- Scope 2 emissions come from purchased electricity, steam, heating, or cooling — not from fuel you burn directly.
- You calculate Scope 2 by multiplying the energy you purchased by an emissions factor specific to your utility or region.
- Most companies report Scope 2 because it is usually larger than Scope 1 and because investors and regulators increasingly require it.
- The emissions factor you use depends on your utility's fuel mix and your location, so the same kilowatt-hour has different carbon impact in different places.
How Scope 2 differs from Scope 1 and Scope 3
Scope 1 covers emissions you produce directly: a delivery truck you own, a boiler in your building, a generator you operate. You measure the fuel burned and convert it to carbon dioxide. Scope 2 covers emissions produced elsewhere but caused by your energy use. Scope 3 covers everything else — emissions from suppliers, from products after you sell them, from employee commutes, from waste disposal.
The three scopes form a hierarchy. Most companies start by measuring Scope 1 because it is straightforward: you own the source, you have the fuel records. Scope 2 comes next because it is usually larger and because electricity use is straightforward to track from utility bills. Scope 3 is the hardest because it requires data from outside your organization and often involves estimation.
Why companies measure and report Scope 2
For many businesses, Scope 2 is the largest source of emissions. A manufacturing plant might burn natural gas in its furnaces (Scope 1), but if it runs electric motors, compressors, and climate control systems, the electricity often accounts for more total carbon. An office building with no on-site fuel at all has only Scope 2 and Scope 3 emissions.
Investors, customers, and regulators now expect companies to report Scope 2 as part of their climate commitments. The Greenhouse Gas Protocol, the most widely used standard, requires Scope 2 reporting for any company claiming to measure its carbon footprint. Many states and countries are moving toward mandatory climate disclosure, and Scope 2 is almost always included. Some customers will not do business with suppliers who do not track it.
How to calculate Scope 2 emissions
Start with your utility bills. You need the total kilowatt-hours of electricity purchased, measured in megawatt-hours (MWh) or kilowatt-hours (kWh). If you also purchase steam or heating from a district energy system, get those volumes too, usually measured in gigajoules (GJ) or British thermal units (BTU).
Next, find the emissions factor for your utility or region. In the United States, the EPA publishes emissions factors by grid region — the Northeast has a different factor than the Southwest because the power mix is different. Your utility may publish its own factor. If you buy renewable energy credits or have a contract for wind or solar power, you may use a lower factor for that portion. International companies use factors from their national grid operator or from the International Energy Agency.
Multiply the energy purchased by the emissions factor. If you used 1,000 MWh of electricity and your regional factor is 0.4 metric tons of CO₂ per MWh, your Scope 2 emissions are 400 metric tons of CO₂ equivalent. Record this separately from Scope 1 so you can track changes year to year.
Location-based versus market-based accounting
The Greenhouse Gas Protocol allows two methods: location-based and market-based. Location-based uses the average emissions factor for the grid where you are located — straightforward and consistent. Market-based uses the emissions factor of the power you actually purchased. If you signed a contract for wind power, you use the wind factor (near zero). If you bought power from a coal plant, you use the coal factor (higher).
Most companies report location-based because it is simpler and because it reflects the actual grid impact of their location. Market-based is useful if you have renewable energy contracts and want to show the benefit. Some companies report both. The choice depends on your industry, your stakeholders' expectations, and whether you have purchased renewable power.
Common sources of Scope 2 emissions
Electricity is the largest component for most organizations. Office buildings, data centers, manufacturing facilities, and retail stores all draw significant power. Steam and hot water from district heating systems are common in dense urban areas and in some industrial parks. Chilled water for air conditioning, purchased from a central plant rather than produced on-site, also counts as Scope 2.
Some companies overlook purchased steam or chilled water because they do not see a fuel bill — they see only an energy bill from the district system. Check your utility invoices carefully. If you are billed for gigajoules or BTU of thermal energy, that is Scope 2. If you generate your own steam or chilled water on-site, that is Scope 1 (you burned fuel to make it).
Reducing Scope 2 emissions
The most direct way is to use less electricity: upgrade to LED lighting, improve insulation, install variable-frequency drives on motors, or optimize HVAC schedules. These measures reduce the kilowatt-hours you purchase, which lowers Scope 2 directly.
You can also change the source of your electricity. Purchasing renewable energy — through power purchase agreements, renewable energy credits, or utility green power programs — lowers your market-based Scope 2. Some utilities offer lower-carbon electricity plans. Moving to a region with a cleaner grid (if your business allows) also reduces location-based Scope 2. These approaches do not reduce total electricity use, but they reduce the emissions per kilowatt-hour.
Frequently Asked Questions
Is Scope 2 emissions the same as my carbon footprint?
No. Your carbon footprint includes Scope 1, Scope 2, and Scope 3. Scope 2 is usually the largest piece for service companies and offices, but manufacturing plants often have large Scope 1 emissions too. A complete footprint requires all three.
Why does my emissions factor change year to year?
The grid's fuel mix changes as utilities retire coal plants, add wind farms, or adjust dispatch. A cleaner grid means a lower emissions factor for the same kilowatt-hour. Your utility or regional grid operator publishes updated factors annually.
Can I use my utility's emissions factor or do I have to use the EPA's?
Either is acceptable if it is transparent and documented. Your utility's factor may be more accurate for your specific situation. The EPA publishes regional factors that work for any utility in that region. Check which one your stakeholders expect — some investors or certifications require a specific source.
Does buying renewable energy credits eliminate my Scope 2 emissions?
For market-based accounting, yes — you report near-zero emissions for that portion. For location-based accounting, no — you still report the grid average because the physical electricity comes from the grid. Report both if you want to show the full picture.
What if I do not know my exact electricity use?
Use your utility bills to estimate. If bills are monthly, add them up for the year. If you have sub-metering for different buildings or departments, use those to allocate. If you are missing months, estimate based on the months you have. Document your method so you can improve it next year.