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Open AccessArticle

Diesel or Electric Jeepney? A Case Study of Transport Investment in the Philippines Using the Real Options Approach

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Copernicus Institute of Sustainable Development, Utrecht University, Princetonlaan 8a, 3584 CB Utrecht, The Netherlands
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Utrecht University School of Economics, Kriekenpitplein 21, 3584 EC Utrecht, The Netherlands
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Mindoro State College of Agriculture and Technology, Masipit, Calapan City 5200, Philippines
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St. Paul University, Manila, 680 Pedro Gil St, Malate, Manila 1004, Philippines
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Author to whom correspondence should be addressed.
World Electr. Veh. J. 2019, 10(3), 51; https://doi.org/10.3390/wevj10030051
Received: 5 May 2019 / Revised: 16 August 2019 / Accepted: 20 August 2019 / Published: 22 August 2019
The Philippines is moving towards a more sustainable public transport system by introducing a public utility vehicle (PUV) modernization program with electric jeepneys (e-jeepneys) and modernized diesel jeepneys. Despite its potential to address problems related to air pollution, traffic congestion, dependence on fuel imports, and carbon emissions, transport groups show resistance to the adoption of the government program due to costs and investment risk issues. This study aims to guide transport operators in making investment decisions between the modernized diesel jeepney and the e-jeepney fleet. Applying the real options approach (ROA), this research evaluates option values and optimal investment strategies under uncertainties in diesel prices, jeepney base fare price, electricity prices, and government subsidy. The optimization results reveal a better opportunity to invest in the e-jeepney fleet in all scenarios analyzed. Results also show a more optimal decision strategy to invest in the e-jeepney immediately in the current business environment, as delaying or postponing investment may incur opportunity losses. To make the adoption of the e-jeepney more attractive to transport operators, this study further suggests government actions to increase the amount of subsidy and base fares, establish public charging stations, and continue efforts to rely on cleaner, cheaper, and renewable sources of electricity. View Full-Text
Keywords: electric vehicle; jeepney; Monte Carlo simulation; optimization; investment under uncertainty; real options electric vehicle; jeepney; Monte Carlo simulation; optimization; investment under uncertainty; real options
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MDPI and ACS Style

Agaton, C.B.; Guno, C.S.; Villanueva, R.O.; Villanueva, R.O. Diesel or Electric Jeepney? A Case Study of Transport Investment in the Philippines Using the Real Options Approach. World Electr. Veh. J. 2019, 10, 51.

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