Biofuel from Jatropha curcas: Environmental sustainability and option value
This 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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bjerksund, Petter & Stensland, Gunnar, 1993. "Closed-form approximation of American options," Scandinavian Journal of Management, Elsevier, vol. 9(Supplemen), pages 87-99.
- Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474, March.
- Searchinger, Timothy & Heimlich, Ralph & Houghton, R. A. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Tokgoz, Simla & Hayes, Dermot J. & Yu, Hun-Hsiang, 2008. "Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change," Staff General Research Papers Archive 12881, Iowa State University, Department of Economics.
- Ariza-Montobbio, Pere & Lele, Sharachchandra, 2010. "Jatropha plantations for biodiesel in Tamil Nadu, India: Viability, livelihood trade-offs, and latent conflict," Ecological Economics, Elsevier, vol. 70(2), pages 189-195, December.
- Noureddine Krichene, 2006. "Recent Dynamics of Crude Oil Prices," IMF Working Papers 06/299, International Monetary Fund.
- James L. Paddock & Daniel R. Siegel & James L. Smith, 1988. "Option Valuation of Claims on Real Assets: The Case of Offshore Petroleum Leases," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 479-508.
When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:78:y:2012:i:c:p:1-8. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.