This blog post is part of a series of 7 articles uncovering all you need to know about marginal signals. In this first article, we introduce the concept of marginal emission factors and begin to examine the complexities that arise when using them. Already know what marginal signals are? Learn what you should consider when using them in practice here or read the next posts in the series on our blog.

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Consider the question: How much am I emitting by consuming electricity at a certain time? This question can have different answers! But why is that? The difference comes from the way we assign responsibility:

The decision to use more or less electricity at a given time doesn’t cause all the power plants to evenly increase their production. The way electricity markets typically work is that power plants are dispatched by increasing cost. If electricity demand had been higher, the first power plant to increase its production would have been the last dispatched one. In other words, the additional electricity requested would have come from the cheapest power plant that still has spare capacity. We call that power plant the marginal power plant. It’s important to remember that the marginal power plant is only a market concept and not a physical reality of how power systems operate.

In a grid with 50% wind and 50% gas production, the consequence of deciding to consume electricity right now (instead of at another time) is that the gas turbine will increase its production (as it’s the only one that has spare capacity). This will cause emissions at a rate of ~500 gCO2 for each additional kWh consumed. The consequence of deciding to consume electricity now is an extra 500 gCO2 for each additional kWh consumed. We call that the marginal emission factor.

However, when accounting for emissions, grid users get a proportional share of all emissions of the grid. For example, if you consume electricity coming from 50% wind and 50% gas, you’ll be responsible for consuming electricity with a footprint of ~250 gCO2/kWh (the average). Your carbon footprint is 250 gCO2 per kWh consumed. We call that the average emission factor.

The consequence of your decision is 500 gCO2/kWh but your footprint is 250 gCO2/kWh 😳.. Confused? That’s because we’re here dealing with two ways of assigning responsibility:

In the average paradigm, responsibility is distributed evenly across grid users. In the 50% wind and 50% grid, if you were to consume electricity causing increased production from the gas turbine, everyone on the grid would be affected and have their footprint proportionally increased. Similarly, if you were to install a new wind turbine which produces low-carbon electricity, everyone on the grid would benefit from it and get a reduced footprint. The footprint of your electricity is the same as other users on the grid.

In the marginal (also called consequential) paradigm, responsibility is distributed based on a causal relationship between decision and consequence: when your decision causes an increased production of the marginal power plant, the additional emissions are not distributed evenly amongst its users but are instead directed to the one who caused such an increment. This leaves other grid users unaffected. Similarly, the benefits of installing a new wind turbine are directed exclusively to the owner, leaving the rest of the grid users with the same emissions.

The marginal paradigm implies isolating a causal relationship between the decision to consume more and the consequences on the grid. It requires knowing which power plant saw its dispatch impacted by the decision. Even though this works well in a simplified example, it becomes nearly impossible in real life with millions of users and power plants connected on a vast and complex grid.

It also becomes clear that both paradigms can’t be used simultaneously: it’s not possible to yield savings that are both fully captured by yourself and also benefit all grid users. Therefore, marginal and average emissions should never be mixed together. It’s the same reason why carbon offsets can’t be deducted from carbon accounting (offsets affect everyone but are captured by the buyer).

A concrete example

Let’s assume for a second that we have a heater connected on a grid with electricity coming from 50% wind (at 0 gCO2eq/kWh) and 50% gas (at 500 gCO2eq/kWh). Let’s furthermore assume that this heater consumes on average 500W.

The average carbon intensity of the grid is 250 gCO2eq/kWh, which yields carbon emissions of 0.5 x 250 = 125 gCO2eq for a given hour.

Let’s assume that heater is smart as it has the ability to shift its consumption. Let’s furthermore assume that the heater was able to shift all of its consumption to an hour where no gas was needed, as all of the electricity came from wind turbines.

In our carbon accounting books, our electricity footprint is now at 0 gCO2eq for that particular hour. However, the emissions saved on the grid by avoiding the production of 500W of gas at 500gCO2eq / kWh (the marginal carbon footprint) amounts to 0.5 x 500 = 250 gCO2eq for that particular hour.

By buying a smart heater, we reduced our footprint from 125 g to 0 g (accounting). By buying a smart heater, we avoided 250 g of emissions (offsetting).

Conclusion

Marginal emissions represent a different paradigm of attributing responsibility for emissions which attempts to capture the consequence of our decisions. As they represent a different paradigm (similar to carbon offsets), they shouldn’t be mixed with the use of average emissions for carbon accounting.

You might also have noticed that because the marginal emissions concept involves understanding the causal relationship between decision and consequence, it inevitably rests on the creation of a counterfactual (i.e. modeling a world where the decision wasn’t made). This is why marginal emission reductions are relative (to the counterfactual), whereas emissions accounting is absolute. It also inevitably creates challenges in calculating and validating them.

Finally, keep in mind that each marginal emission factor has its own domain of validity: if large-scale decisions are made (such as the decision to install a new factory somewhere), then the consequence might affect more than the dispatching of new power plants (it could cause the building of new power plants). This adds to the complexity of sourcing and using marginal emission factors.

Learn more about marginal emissions in the other blogs of our series.

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This article had originally been published on 13/06/2019 and has been updated on 14/01/2025.