The calculation of electricity emissions depends on a company’s role in the electricity value chain and on whether the emissions fall under Scope 1, 2, or 3 calculations. In this article, we explain how electricity producers, electricity retailers, transmission companies, end users of electricity, and owners of energy companies account for electricity generation, purchased electricity, resale, transmission losses, and ownership in emissions calculations in accordance with GHG Protocol emissions calculations. We also clarify market- and location-based Scope 2 calculations, as well as the use of primary data, residual distribution, and emission factors.
According to the IEA, electricity generation is the world’s largest single source of CO2 emissions. These emissions are primarily generated by the combustion of fossil fuels—namely, coal, natural gas, and oil. The situation in Finland is different, as according to the Finnish Energy Industries Association, 96% of electricity was already generated from renewable and emission-free energy sources in 2025.
Demand for electricity is growing rapidly as efforts are made to reduce emissions by electrifying heating and transportation, for example. The data center boom is also increasing the demand for electricity. In practice, every company needs electricity to produce its own products and services. One key way to reduce emissions is to purchase emission-free electricity.
Electricity runs the world, and it can also play a significant role in mitigating climate change. But how are electricity emissions calculated from the perspective of different actors in the value chain?
How are electricity emissions categorized in Scope 1, 2, and 3 calculations?
Under the GHG Protocol standards, electricity emissions are calculated across all three scopes. Direct Scope 1 emissions from an energy company’s own operations include emissions from fuel use. In practice, this refers to emissions generated by power generation facilities owned or controlled by the energy company.
Emissions from purchased energy are calculated under Scope 2. In addition to electricity emissions, emissions from purchased district heating, district cooling, and steam are also taken into account. Scope 2 includes the calculation of market-based and location-based emissions.
Scope 3 covers emissions along the value chain, and electricity-related emissions fall into several categories. Category 3 includes upstream emissions from electricity generation as well as emissions resulting from transmission and distribution losses, for example. Electricity consumption during the use of sold products is calculated in Category 11. Emissions related to energy companies’ holdings may be accounted for in Category 3 or 15, depending on the calculation’s scope. Emissions resulting from electricity consumption may also be included in other categories, such as those related to the electricity consumption of electric vehicles.
Calculating electricity emissions is not entirely straightforward, as the emissions associated with the same electricity are reported differently depending on where a company operates in the value chain. Once a company’s role in the value chain is identified, the scope of the emissions calculation can be defined correctly, thereby avoiding double-counting of emissions.
How does an energy company calculate emissions from electricity generation?
Energy companies calculate the direct emissions from the fuels used in their own production under Scope 1. The indirect upstream emissions under Scope 3, on the other hand, are calculated in Category 3.
For power generation facilities covered by the EU Emissions Trading System, direct CO2 emissions from energy production are determined in accordance with the emissions trading monitoring plan. For fossil fuels, the most appropriate emission factors and oxidation factors are used. Fossil CO2 emissions generated during the production of renewable energy, such as hydro, wind, and solar power as well as biomass, and nuclear power are 0.
Fuels may also contribute to emissions of other greenhouse gases, such as methane (CH4) and nitrous oxide (N2O), as well as biogenic emissions.
If an energy company uses purchased electricity in addition to electricity generated for its own use, its emissions are calculated under Scope 2 in the same way as for other companies.
Life-cycle emissions from fuels and energy, not included in Scope 1 and 2 calculations are calculated under Category 3 of Scope 3. These include, for example, emissions from timber harvesting, oil refining, and fuel transportation. How are electricity transmission and transmission losses reflected in emissions calculations?
How are electricity sales taken into account in emissions calculations?
Energy companies can sell electricity that they either generate themselves or purchase from the market. Emissions from self-generated and sold electricity are calculated under Scope 1 as described in the previous section. These sales do not need to be accounted for again under Category 3 of Scope 3. This helps to avoid double-counting of the same emissions.
On the other hand, if electricity is purchased from another energy company or on the exchange, the emissions from the electricity sold are calculated under Scope 3, Category 3, which includes a provision applicable to electricity resale: “generation of purchased electricity that is sold to end users.”
When purchasing electricity from another energy company, it is recommended to primarily use the emission factor for that company’s own electricity production (so-called primary data) as defined by the energy company in question. However, if electricity is purchased through the electricity exchange, the national residual distribution factor for the electricity sold should be used in emissions calculations. The residual distribution factor is high compared to the emission factors of the electricity sold by many energy companies. It is therefore advisable to rely on primary data in the calculations whenever possible.
How are electricity transmission and transmission losses reflected in emissions calculations?
How losses resulting from electricity transmission are accounted for in emissions calculations depends on a company’s role in the electricity value chain.
The energy producer does not calculate emissions resulting from electricity transmission losses separately, as the emissions from the electricity generated to cover those transmission losses are already included in the energy producer’s Scope 1 calculation.
To offset transmission network losses, the electricity transmission company calculates the emissions from the electricity it purchases under Scope 2.
Other companies that purchase electricity for their own use report electricity transmission losses under Scope 3, Category 3.
How are the emissions from electricity purchased by companies calculated?
If a company purchases electricity for its own use, i.e., is an end user of electricity, the emissions from the generation of the purchased electricity are accounted for under Scope 2, and other electricity-related emissions not included in Scope 2 are accounted for under Category 3 of Scope 3.
In Scope 2, emissions from purchased electricity are calculated both on a market-based and a location-based basis.
Market-based calculations take the origin of the electricity purchased and the corresponding emissions into account. For example, if a company purchases electricity certified as renewable or emission-free, it can count that amount of electricity as zero-emission. If a company does not know the origin of the electricity purchased from a leased property, for example, the emissions from the purchased electricity are calculated using a residual distribution factor.
What is a residual mix?
A residual mix represents the share of an energy supplier’s energy portfolio after the renewable and zero‑emission electricity sold with Guarantees of Origin has been removed.
In location-based calculations, emissions are calculated using the average emission factor for the specific network. For electricity, this means using the country-specific electricity generation mix factor. For district heating, on the other hand, the average factor for the district heating network is used.
Emissions from energy consumption cannot be calculated on a cost basis. Instead, the calculation requires consumption data. Emission factors for the energy sector are updated regularly. It is therefore important to use up-to-date emission factors corresponding to the year of calculation.
In Scope 3, Category 3, transmission losses from purchased energy and so-called upstream emissions occurring along the value chain (not included in Scope 1 or Scope 2 calculations) are accounted for.
How do energy company ownership structures affect a company’s emissions calculations?
If a company owns shares in an energy company, the method of calculating emissions depends on the calculation’s scope. If emissions are calculated based on equity ownership, the emissions corresponding to the company’s ownership stake are included in its Scope 1 and Scope 2 calculations. If, on the other hand, a calculation method based on operational control is used, the emissions of owned companies over which the company has no operational control are calculated in proportion to the ownership share under Scope 3 category 15 (Investments).
Finland uses the so-called Mankala model, under which a company receives a share of the electricity generated by power plants proportional to its ownership stake. In such cases, the calculations and the selection of the calculation scope must be carried out with particular care. That is to ensure that the same emissions are not counted twice, for example, in categories 3 and 15.
If possible, Category 15 should use the actual emissions data from the owned energy company rather than the general sector-specific factor based on euro-denominated calculations. This approach better reflects the emissions associated with that specific ownership. It also results in lower emissions in Finland and other Nordic countries compared to using a Europe-based sectoral factor.
All in all, it is advisable to begin calculating electricity emissions by identifying the company’s role in the electricity value chain, selecting the appropriate calculation scope, and applying it consistently when calculating Scope 1, Scope 2, and Scope 3 emissions.
Do you need up-to-date energy emission factors or assistance with your company’s emissions calculations? OpenCO2net offers calculation tools and expert services in accordance with the GHG Protocol standards. Our experts have supported numerous energy sector companies in calculating emissions, determining emission factors as well as in developing SBTi targets and climate transition plans.
