The Economic Viability of Jatropha Biodiesel in Nepal

Nepal depends entirely on imports for
meeting its demand for petroleum products, which account for
the largest share in total import volume. Diesel is the main
petroleum product consumed in the country and accounts for
38 percent of the total national CO2 emissions from fuel
consumption. There is a general perception that the country
would economically benefit if part of imported diesel is
substituted with domestically produced jatropha-based
biodiesel. This study finds that the economics of
jatropha-based biodiesel depend on several factors, such as
diesel price, yield of jatropha seeds per hectare, and
availability of markets for production byproducts, such as
glycerol and jatropha cake. Under the scenarios considered,
jatropha biodiesel is unlikely to be economically
competitive in Nepal unless seed yields per hectare are
implausibly large and high returns can be obtained from
byproduct markets that do not yet exist. In the absence of
byproduct markets, even earnings from a carbon credit do not
help jatropha biodiesel to compete with diesel unless the
credit value exceeds US$50/tCO2 (which is well above current
values) and jatropha seed yield is at or above the midrange
of the scenarios considered. Declines in diesel prices from
the levels observed in 2009–13 only compound the economic
competitiveness issue.