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Existing literature on Zero Emission Neighborhoods (ZENs) and Buildings (ZEBs) only allow for reaching the zero emission target locally. This paper evaluates the impact of allowing to buy CO 2 compensation to reach that target in the design of ZENs. This is motivated by questions regarding the relevance of investing in local renewable production (mainly from PV) in a power system dominated by renewable hydropower. Further, it contributes to the existing literature regarding ZENs and ZEBs by highlighting the importance of the choice of the CO 2 factor of electricity for the design of ZENs' energy system. A case study illustrates the impact of those choices on the resulting energy system design using the existing ZENIT model. Three CO 2 factors for electricity are used in the case study: a yearly average CO 2 factor for Norway (18 gCO 2 ∕ kWh), an hourly average CO 2 factor for Norway and a yearly average European factor (at 132 gCO 2 ∕ kWh). The energy system design of the ZEN is little affected when using hourly CO 2 -factors compared to yearly average factors, while the European factor leads to less investment in PV. Hourly marginal CO 2 emission factors are also investigated using three accounting methods. There large differences in energy system design and emissions depending on where the factor is applied. The price of external compensation is varied between 0–2000 €/ tonCO 2. A lower price of external CO 2 compensations mainly reduces the amount of PV investment. Allowing the purchase of CO 2 compensations at 250 €/ tonCO 2 could reduce the total costs by more than 10%. • Average European emission factors results in less PV investment. • Hourly and yearly average factors give minor investment differences. • Allowing the purchase of external compensations results in overall cost reductions. • With marginal factors, what it is applied to (which imports or exports) is important. • Increasing CO 2 price leads to an increase of the size of PV and heat pumps. [ABSTRACT FROM AUTHOR]