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Biofuel from Jatrofa Curcas: environmental sustainability and option value

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  • Marcello Basili
  • Fulvio Fontini

Abstract

The paper considers the use of a non-edible plant, Jatropha Curcas (JC), for the production of biofuel as a substitute for traditional fossil fuel. The whole production chain is analyzed; energy and environmental balances are reported. The investment value in biofuel from JC is also studied, and both its intrinsic and option values are calculated. A reference case is evaluated, namely, the cultivation of JC as substitution for conventional fuel in a specific less developed country, Kenya, that lies in the tropical region where JC grows. The investment is modelled 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. Finally, the case of a relinquishment requirement for the specific land-use is also evaluated by modeling the corresponding American call option value; it is shown that a land-use release requirement does not change the optimal investment strategy.

Suggested Citation

  • 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.
    • Handle: RePEc:usi:depfid:1009
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    References listed on IDEAS

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    Cited by:

    1. van Eijck, Janske & Romijn, Henny & Balkema, Annelies & Faaij, André, 2014. "Global experience with jatropha cultivation for bioenergy: An assessment of socio-economic and environmental aspects," Renewable and Sustainable Energy Reviews, Elsevier, vol. 32(C), pages 869-889.
    2. Portugal-Pereira, Joana & Nakatani, Jun & Kurisu, Kiyo H. & Hanaki, Keisuke, 2015. "Comparative energy and environmental analysis of Jatropha bioelectricity versus biodiesel production in remote areas," Energy, Elsevier, vol. 83(C), pages 284-293.
    3. Pu Peng & Wenguang Zhou, 2014. "The Next Generation Feedstock of Biofuel: Jatropha or Chlorella as Assessed by Their Life-Cycle Inventories," Agriculture, MDPI, vol. 4(3), pages 1-14, July.
    4. Perumal, Varatharaju & Ilangkumaran, M., 2018. "Water emulsified hybrid pongamia biodiesel as a modified fuel for the experimental analysis of performance, combustion and emission characteristics of a direct injection diesel engine," Renewable Energy, Elsevier, vol. 121(C), pages 623-631.
    5. Loretta Mastroeni & Alessandro Mazzoccoli & Greta Quaresima & Pierluigi Vellucci, 2021. "Wavelet analysis and energy-based measures for oil-food price relationship as a footprint of financialisation effect," Papers 2104.11891, arXiv.org, revised Mar 2022.
    6. A.N. Siregar & J.A. Ghani & C.H.C. Haron & M. Rizal & Z. Yaakob & S.K. Kamarudin, 2015. "Comparison of oil press for jatropha oil - a review," Research in Agricultural Engineering, Czech Academy of Agricultural Sciences, vol. 61(1), pages 1-13.
    7. 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.
    8. Dussadee Rattanaphra & Sittinun Tawkaew & Sinsupha Chuichulcherm & Wilasinee Kingkam & Sasikarn Nuchdang & Kittiwan Kitpakornsanti & Unchalee Suwanmanee, 2023. "Evaluation of Life Cycle Assessment of Jatropha Biodiesel Processed by Esterification of Thai Domestic Rare Earth Oxide Catalysts," Sustainability, MDPI, vol. 16(1), pages 1-18, December.
    9. Guadalupe Pérez & Jorge M. Islas-Samperio, 2021. "Sustainability Evaluation of Non-Toxic Jatropha curcas in Rural Marginal Soil for Obtaining Biodiesel Using Life-Cycle Assessment," Energies, MDPI, vol. 14(10), pages 1-21, May.
    10. David Mueller, 2016. "The right to choose: political decisions and environmental investments," International Journal of Innovation and Sustainable Development, Inderscience Enterprises Ltd, vol. 10(3), pages 219-236.
    11. Ram N. Acharya & Rafael Perez-Pena, 2020. "Role of Comparative Advantage in Biofuel Policy Adoption in Latin America," Sustainability, MDPI, vol. 12(4), pages 1-13, February.
    12. Mastroeni, Loretta & Mazzoccoli, Alessandro & Quaresima, Greta & Vellucci, Pierluigi, 2022. "Wavelet analysis and energy-based measures for oil-food price relationship as a footprint of financialisation effect," Resources Policy, Elsevier, vol. 77(C).
    13. Asarudheen Abdudeen & Mohamed Y. E. Selim & Manigandan Sekar & Mahmoud Elgendi, 2023. "Jatropha’s Rapid Developments and Future Opportunities as a Renewable Source of Biofuel—A Review," Energies, MDPI, vol. 16(2), pages 1-28, January.
    14. Portugal-Pereira, Joana & Nakatani, Jun & Kurisu, Kiyo & Hanaki, Keisuke, 2016. "Life cycle assessment of conventional and optimised Jatropha biodiesel fuels," Renewable Energy, Elsevier, vol. 86(C), pages 585-593.
    15. Lim, Bo Yuan & Shamsudin, Rosnah & Baharudin, B.T. Hang Tuah & Yunus, Robiah, 2015. "A review of processing and machinery for Jatropha curcas L. fruits and seeds in biodiesel production: Harvesting, shelling, pretreatment and storage," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 991-1002.

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    More about this item

    Keywords

    Biofuel; Jatropha Curcas; Real Option; Alternative Energy Sources.;
    All these keywords.

    JEL classification:

    • 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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