What sources are included in Scope 3 Category 3: Fuel- and Energy-related Activities?

A common misconception is that Category 3 acts as a catch-all for any energy-related emissions that aren't Scope 1 or Scope 2. This isn't correct. Category 3 has a narrow, specific job: it captures what's missing from the emission factors you already used for your own fuel combustion and electricity consumption. Energy consumed elsewhere in your value chain, like base building energy in a shared tenancy, or an employee's home energy use while working remotely, isn't part of Category 3 at all. It belongs in other Scope 3 categories, or in some cases isn't reported as your emissions at all.

What Category 3 contains

Under the GHG Protocol Scope 3 Standard, Category 3 is defined as emissions from the extraction, production, and transportation of the fuel and energy that you have already accounted for in Scope 1 or Scope 2, but which those scope 1/2 combustion factors don't capture. It has four parts:

A useful way to think about it: your Scope 1 and Scope 2 factors tell you the emissions from burning the fuel. Category 3 tells you the emissions from getting that fuel to the point of combustion in the first place, plus what's lost along the way.

Well-to-tank and well-to-wheel

There are two terms you'll see used in this context:

• Well-to-tank (WTT): the emissions from extracting, processing, and transporting a fuel, up to (but not including) the point it's combusted. This is exactly what Category 3(a) and (b) are asking for.
• Well-to-wheel (WTW): WTT plus the combustion emissions themselves (sometimes called "tank-to-wheel"). This gives you the full lifecycle picture, used most often in a transport fuel context.

The reason this matters: a standard combustion emission factor (the kind used for Scope 1 and Scope 2) only reflects what comes out of the tailpipe or the power station stack. It says nothing about the mining, drilling, refining, or pipeline emissions that happened before that fuel arrived. The GHG Protocol Scope 3 Standard requires life-cycle emission factors for Category 3 specifically because relying on combustion factors alone would understate your full energy footprint. Category 3 exists to close that gap.

T&D losses

T&D (transmission and distribution) losses cover the emissions from generating the electricity that's lost as heat in the grid network between the power station and your meter. You didn't consume this electricity, but it had to be generated anyway to compensate for the loss, so the GHG Protocol requires end users to report it separately in Scope 3 rather than folding it into Scope 2.

T&D losses are not the same as the upstream fuel extraction emissions in (a) and (b) above. They're two distinct components of Category 3, and both are meant to be accounted for.

Generation of purchased electricity sold to end users

This fourth component applies to utility companies and energy retailers who purchase wholesale electricity and resell it to their customers. It isn't relevant to the vast majority of Trace customers, since you're the end consumer of the electricity you report, not a reseller.

If your company generates its own on-site renewable electricity and sells surplus back to the grid, creating Large-scale Generation Certificates (LGCs), this is a different activity and doesn't create a Category 3(d) reporting obligation. It's worth noting, though: if you sell your LGCs rather than retain them, you can't also claim your own consumption of that generation as zero-emission under the market-based Scope 2 method, since the environmental attribute has been transferred to whoever buys the certificate.

The Practical Test

• Is this energy that you've already reported under your own Scope 1 or Scope 2? → It may belong in Category 3.
• Is this energy consumed by someone else in your value chain (a landlord, an employee at home, a supplier)? → It belongs in a different Scope 3 category, such as Scope 3 Category 8: Upstream Leased Assets or Scope 3 Category 7: Employee Commuting (WFH)
• Are you an energy retailer or utility reselling electricity you've purchased? → Category 3(d) may apply to you specifically.
• Have you sold LGCs from your own generation to a third party? → This is a Scope 2 market-based consideration, not a Category 3 matter.

Trace methodology

Trace currently calculates T&D losses (component c) as part of your Category 3 figure, using the Australian Government's National Greenhouse Accounts (NGA) Factors, which include grid loss emissions in their derivation.

Trace does not currently calculate well-to-tank emissions for purchased electricity (component b) by default. Unlike T&D losses, there is no single published Australian government factor for this component; it requires building a methodology from several separate public data sources. We're actively developing this and intend to bring it into default Category 3 reporting ahead of Scope 3 mandatory reporting requirements under AASB S2.

Related Articles

•  What are Scope 1, 2 and 3 emissions?

• What Scope 3 categories do I need to measure?