Biodiesel

Jatropha: A Green Fuel Awash in Red Ink


Jatropha: A Green Fuel Awash in Red Ink

Photographs from left: Carlos Litulo/AFP/Getty Images; Ahmad Fuad Morad/Flickr

Money may not grow on trees, but for a time it appeared to grow on bushes—specifically, a tropical shrub called jatropha curcas. Over the past decade, jatropha was planted on millions of acres across Asia and sub-Saharan Africa after research showed that oil from its crushed seeds makes an excellent biofuel. Because jatropha can tolerate dry, rocky soil unsuited to agriculture, boosters said, subsistence farmers could grow it as a cash crop without denting food production. And with governments worldwide pushing renewable fuels, investors in jatropha-oil ventures looked set to win, too.

So far, the jatropha boom has produced more losers than winners. Many projects have foundered as seed production has failed to meet expectations, and India, China, and other countries have scaled back plans for additional planting. Farmers have discovered that while jatropha can indeed grow on barren land, it doesn’t flourish there, says Promode Kant, director of the Institute of Green Economy in New Delhi and co-author of a report titled The Extraordinary Collapse of Jatropha As a Global Biofuel. Says Kant: “Without moisture it does not seed, or it seeds extremely poorly.”

Illustration by Kiji McCafferty

Moreover, some jatropha ventures appear to have harmed the environment and the poor people they were supposed to help. In 2006, 11 villages in Tanzania agreed to let BioShape, a Dutch company, develop a jatropha plantation in exchange for jobs and aid. BioShape logged the land but planted jatropha on only a small portion of it, then shut down in 2010, says Stanslaus Nyembea, an attorney with the Lawyers’ Environmental Action Team, an advocacy group representing BioShape workers who lost their jobs. “The company was not interested in jatropha, they were interested in the timber,” Nyembea says. BioShape’s telephone in the Netherlands has been disconnected. A spokesman for Dutch utility Eneco, a major backer of the project, declined to comment.

Other jatropha ventures in Tanzania and Mozambique were left in limbo when Sun Biofuels, a British company that had planned to produce biodiesel for aircraft, ceased operations last fall after failing to obtain financing. Lion’s Head Global Partners, a London investment fund that acquired Sun’s Tanzanian assets, wants to restart operations but is having trouble finding investors, says Christopher Egerton-Warburton, a partner in the fund. Lack of financing derailed plans by another British company, Viridas (VIR:LN), to develop jatropha plantations in Brazil. According to its London Stock Exchange filings, Viridas has shifted its focus to mining.

Investors have suffered, too. Shares of jatropha companies Gem BioFuels (GBF:LN), a planter in Madagascar, and D1 Oils (DOO:LN), which had a joint venture with oil giant BP (BP), now trade as penny stocks in London. And last fall a British court convicted seven men of running a scheme to sell shares in Worldwide Bio Refineries, which they fraudulently claimed to be producing biodiesel from jatropha.

Still, potential customers remain keenly interested. Bloomberg New Energy Finance predicts that by 2018 jatropha-based aircraft fuel could be produced for 86¢ per liter, about the same price as conventional jet fuel today and far less than fuel made from soybeans or palm. Last August a Boeing 777 aircraft owned by Aeromexico made the first intercontinental flight powered by a jatropha-based fuel, from Mexico City to Madrid. And Airbus (EAD:FP) has teamed with airline TAM (TAM) to grow jatropha in Brazil.

Jatropha’s commercial future could hinge on plant science. SG Biofuels, a San Diego company, is developing hybrid strains that it says will produce more seeds. In January the company received $17 million in venture capital to expand jatropha research and planting in Brazil, Guatemala, and India. “We are in full-court commercial mode,” says SG Chief Executive Officer Kirk Haney.

It’s unlikely, though, that small farmers will ever strike it rich growing jatropha on otherwise barren land. “Jatropha remains promising only with adequate water, and the collection of seeds is very costly,” Indian researcher Kant says. In the tropical latitudes where the shrub grows, just a handful of countries will be able to produce jatropha economically, he says. “I see it only as a possibility in a very large plantation,” Kant says, “not for subsistence farmers.”

The bottom line: Despite early hype of potential riches for jatropha producers, planting the oil seed hasn’t paid off for either small farmers or investors.

Matlack is a Paris correspondent for Bloomberg Businessweek.

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