Biofuel from Jatropha curcas: Environmental sustainability and option value
AbstractThis paper considers the use of a non-edible plant, Jatropha curcas (J. curcas), for the production of biofuel as a substitute for traditional fossil fuel. It is shown that the net energy balance and greenhouse gases (GHGs) balance are positive. The investment value in biofuel from J. curcas is also studied, and both its intrinsic and option values are calculated. A reference case is evaluated, namely, the cultivation of J. curcas as a substitute for conventional fuel in a specific less-developed country, Kenya, that lies in the tropical region where J. curcas grows. The investment is modeled as a perpetual investment call option. It is shown that the Net Present Value is positive for a vast range of discount factors and investment costs, while the option value depends crucially on the parameters of the model. A positive option value points out those cases in which it is optimal to defer the investment even if it entails a positive and possibly high Net Present Value.
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Bibliographic InfoArticle provided by Elsevier in its journal Ecological Economics.
Volume (Year): 78 (2012)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/ecolecon
Biofuel; Jatropha curcas; Real option value;
Other versions of this item:
- Marcello Basili & Fulvio Fontini, 2009. "Biofuel from Jatrofa Curcas: environmental sustainability and option value," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 1009, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
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- Pu Peng & Wenguang Zhou, 2014. "The Next Generation Feedstock of Biofuel: Jatropha or Chlorella as Assessed by Their Life-Cycle Inventories," Agriculture, MDPI, Open Access Journal, vol. 4(3), pages 217-230, July.
- Litvine, Dorian & Gazull, Laurent & Dabat, Marie-Hélène, 2014. "Assessing the potential demand for biofuel by combining Economics and Psychology: A focus on proximity applied to Jatropha oil in Africa," Ecological Economics, Elsevier, vol. 100(C), pages 85-95.
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