Biofuel from Jatrofa Curcas: environmental sustainability and option value

Marcello Basili and Fulvio Fontini

Department of Economic Policy, Finance and Development (DEPFID) University of Siena from Department of Economic Policy, Finance and Development (DEPFID), University of Siena

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.

Keywords: Biofuel; Jatropha Curcas; Real Option; Alternative Energy Sources. (search for similar items in EconPapers)
JEL-codes: C61 Q42 Q56 (search for similar items in EconPapers)
Date: 2009-11
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://repec.deps.unisi.it/depfid/text1009.pdf (application/pdf)

Related works:
Journal Article: Biofuel from Jatropha curcas: Environmental sustainability and option value (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:usi:depfid:1009

Access Statistics for this paper

More papers in Department of Economic Policy, Finance and Development (DEPFID) University of Siena from Department of Economic Policy, Finance and Development (DEPFID), University of Siena Contact information at EDIRC.
Bibliographic data for series maintained by Carlo Zappia ().