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Biofuel from Jatropha curcas: Environmental sustainability and option value

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  • Basili, Marcello
  • Fontini, Fulvio

Abstract

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.

Suggested Citation

  • Basili, Marcello & Fontini, Fulvio, 2012. "Biofuel from Jatropha curcas: Environmental sustainability and option value," Ecological Economics, Elsevier, vol. 78(C), pages 1-8.
    • Handle: RePEc:eee:ecolec:v:78:y:2012:i:c:p:1-8
    DOI: 10.1016/j.ecolecon.2012.03.010
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    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 value;
    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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