Electricity-related emissions: Why measurement methods matter

In the era of AI-driven power demand, scrutiny over electricity-related emissions is intensifying. With this increased attention comes growing confusion around how to measure and report these emissions. The GHG Protocol Corporate Standard and life cycle assessment (LCA) are two widely used methods for measuring and reporting electricity-related emissions, but each follows its own complex, and often incompatible, set of rules. 

This piece will examine the differences between these approaches and answer common questions such as:

• What are the differences between the GHG Protocol Corporate Standard and LCA?

• Why do they result in different emissions for the same type and amount of electricity?

• Can renewable energy contracts reduce electricity-related emissions under both methods?

• When should you use each approach?

Both the GHG Protocol Corporate Standard and LCA are powerful tools that, if used in complementary ways, can help organizations identify GHG emissions hotspots and develop more effective pathways for decarbonization.

What is the GHG Protocol Corporate Standard?

The GHG Protocol Corporate Standard is a globally recognized framework for corporate entities to publicly report GHG emissions throughout their value chain. It divides emissions into three scopes:

• Scope 1: Direct emissions from owned or controlled sources, such as company-owned vehicles, on-site fuel consumption, or industrial processes., 

• Scope 2: Indirect emissions from the generation of purchased electricity, heat, steam, or cooling. These emissions are generated off-site, but result from an organization’s energy consumption. 

• Scope 3: Indirect emissions across an organization’s value chain. Scope 3 is divided into 15 categories, including a company’s supply chain activities, business travel, employee commuting, investments, and product lifecycle emissions. 

This piece focuses on emissions associated with electricity consumed by a reporting entity. These electricity-related emissions primarily fall under scope 2 and scope 3: category 3 (fuel- and energy-related activities, or FERA). 

Figure 1. Overview of the GHG Protocol scopes and emissions across the value chain. Adapted from the Greenhouse Gas (GHG) Protocol. 2023. Corporate Value Chain (Scope 3) Accounting and Reporting Standard. p5. 

Scope 2: Electricity generation emissions

Scope 2 emissions account for the generation of electricity a company purchases or uses. Hypothetically, if a company were powered by a single solar project, it would report zero scope 2 emissions. In reality, a company is powered by a combination of power generation assets and must report them under scope 2 emissions. This combination of power generation assets is the location-based scope 2 method. These emissions can be reported using two methods: 

• Location-based method: Reflects the average emissions intensity of the local electricity grid where the consumption occurs. This approach is mandatory under various reporting frameworks and does not take into account a company’s procurement choices.

• Market-based method: Reflects an organization’s actual procurement decisions and energy-sourcing strategies. It accounts for specific contracts, such as Power Purchase Agreements (PPAs), Renewable Energy Certificates (RECs), and green tariffs, which allow businesses to claim lower emissions from their purchased electricity.

Scope 3: Category 3 FERA

Scope 3: category 3 fuel and energy related activities (FERA) reports on non-generation electricity emissions associated with: 

• Upstream emissions: Emissions associated with the production and transportation of fuels needed for electricity generation 

• Transmission and distribution (T&D) losses: Emissions associated with the loss of electricity while delivering it from the generator to the consumer.

The GHG Protocol Corporate Standard does not include emissions associated with the manufacturing, construction, and end-of-life phases of electricity generation equipment; however, some datasets used for reporting may include Manufacturing emissions. While scope 3.3 guidance may not require these emissions to be included, companies reporting on their electricity-related emissions should include these additional sources of emissions if possible in order to more completely represent their total emissions impact. The GHG Protocol Corporate Standard allows for the reduction of some of the reported scope 3 FERA emissions by contracting renewable energy (Appendix B Scope 2 Guidance Accounting for Energy-Related Emissions Throughout the Value Chain). 

What is a Life Cycle Assessment (LCA)?

An LCA is a systematic method to quantify the environmental impacts of a process, product, or project throughout its full life cycle. A life cycle includes everything from raw material extraction (“cradle”) to manufacturing/production (“gate”) through disposal (“grave”). 

LCAs primarily follow a standard published by the ISO organization (ISO 14040 / 14044). The ISO standards establish industry-wide rules for which processes are included and how to assign environmental burdens to products. 

An LCA can be used for any product, process, or project, and can estimate multiple different environmental impacts (i.e., climate change, human health, ecotoxicity, eutrophication, ozone depletion). 

Electricity-related emissions can be different using the GHG Protocol and LCA

The GHG Protocol Corporate Standard and LCA (as per ISO standards) generally include different life cycle stages of electricity use when estimating GHG emissions. Therefore the approaches can result in different reported emissions.

Figure 2. The different stages of electricity-related emissions companies report using the GHG Protocol Corporate Standard and the LCA ISO standards.

Key differences in reporting electricity-related emissions

GHG Protocol Corporate Standard includes emissions in the following phases: 

• Generation (scope 2)

• Transmission and distribution (T&D) losses (scope 3.3)

• Fuel (if applicable) (scope 3.3)

LCA considers emissions with all activities associated with power generation from “cradle to grave,” including:

• Manufacturing

• Construction

• Generation

• Fuel (if applicable)

• Use-phase (if applicable)

• End-of-life

Use-phase electricity-related emissions are emissions generated by electricity-consuming equipment used or sold by the reporting company (representing additional scope 1 or scope 3 emissions, respectively). Examples include sulfur hexafluoride (SF6) emissions from electrical transformers or high-GWP refrigerant leakage from air conditioners. Please note that both the LCA and GHG Protocol Corporate Standard provide guidelines for reporting these emissions. However, due to the equipment-specific nature of these emissions, they are excluded from the following table. The table compares electricity-related emissions associated with different electricity sources using the GHG Protocol Corporate Standard approach and the LCA approach. 

*US Average T&D Loss Rate: 4.2% x US Average Grid CI: 410  g CO2e/kWh (GREET1 2024, US grid average. 10% FERA; 1% construction, facilities, maintenance, and end-of-life; 89% fuel combustion).

Reducing electricity emissions with renewable energy

Renewable energy mechanisms under the GHG Protocol

The GHG Protocol Corporate Standard allows companies to contract for renewable electricity as a mechanism to reduce reported emissions. The GHG Protocol Corporate Standard defines allowable energy contracts that can be used to reduce emissions associated with electricity consumption (market-based reporting). 

In North America, one of these allowable contracts is RECs, which represent 1 MWh of renewable generation. Analogous instruments used in other locations, such as Guarantees of Origin (GOs) in Europe and Green Electricity Certificates (GECs) in China, are also permissible under the GHG Protocol Corporate Standard. 

Figure 3. Allowable energy contracts as defined by the GHG Protocol. Adapted from Greenhouse Gas (GHG) Protocol. 2023. GHG Protocol Scope 2 Guidance. p48. 

RECs were developed as a contractual mechanism for renewable electricity in response to the fundamental structure of “a power grid.” In a power grid, it is impossible to link a single generator to a single load. Power is injected at a point in the grid and withdrawn at a different point in the grid; there is no traceable pathway. 

RECs were created to track the attributes of electricity generation entering into a power grid for the entity that consumes the power at a different point. The GHG Protocol Corporate Standard allows buyers to claim exclusive use of renewable electricity with RECs even if they are actually consuming a mixture of electricity from the grid. 

Renewable energy mechanisms under the LCA ISO Standard

ISO 14040 standard does not address the use of renewable electricity contracts. However, the ISO 14044 standard provides the following guidance:

"When determining the elementary flows associated with production, the actual production mix should be used whenever possible, in order to reflect the various types of resources that are consumed. As an example, for the production and delivery of electricity, account shall be taken of the electricity mix, the efficiencies of fuel combustion, conversion, transmission and distribution losses."

It does not explicitly define whether RECs can or cannot be used in the determination of the “actual production mix.” In the event an organization does procure a renewable energy contract to reduce the emissions reported within the LCA, it should disclose that clearly in order to communicate the impact of the contract on the carbon intensity of the LCA with and without the use of RECs.

Can RECs be used to report reduced electricity emissions? 

Powerful tools for different use cases

The GHG Protocol Corporate Standard and LCA ISO Standard are both powerful tools that can provide insight into emissions associated with electricity use. The GHG Protocol Corporate Standard allows companies to use a standardized framework to report emissions associated with electricity use and interventions on an annual basis. The LCA ISO standard is a detail-driven analysis that allows a deep dive into specific processes, projects, or products. This detailed analysis allows for deeper insights into areas where a company may have more ability to address specific interventions for emission hot spots. Using these tools together, while understanding the boundaries of each, can provide companies with a more effective and impactful approach to decarbonization.

Dive deeper with Carbon Direct 

At Carbon Direct, we help organizations understand how, when, and where to report emissions by all relevant standards, and also effectively report the benefits of sourcing low-carbon electricity. 

With data center growth and AI adoption driving the sharpest rise in US electricity demand in decades, organizations must navigate how to scale electricity use without losing ground on climate targets.

Over the next few years, Carbon Direct expects electricity loads to rise significantly while grid decarbonization struggles to keep pace. That means electricity sourcing decisions, and how emissions from those choices are measured, will become a defining factor in whether companies meet their climate commitments.