The cowman and the fuel baron can be friends.

Ethanol refiners in Brazil are snapping up pasture land currently owned by cattle ranchers, according to Pedro Seraphim, an attorney in the law firm of Tozzini Freire in Brazil. Seraphim has concluded a few of these transactions already. (He was in the U.S. on business so we chatted.)

“It’s a more productive use of the land,� he said. “Pastures have a very low return.�

Colonizing cattle ranches could also help get around some of the complaints about biofuels. Taking over cattle ranches, potentially, curbs some of the demand for cutting down virgin forests. Cattle ranchers are also some of the largest consumers of corn and soy. Fewer cattle ranches means less pressure on food prices.

Brazil has around 340 million hectares of arable land, according to Seraphim. Around 210 to 211 million are used for cattle ranching. 63 million hectares are used for food of the entire sugar crop. crops. 7.8 million hectares are dedicated to ethanol production, or about half of the overall sugar crop. (Ethanol refiners use the cane leftovers to run boilers at the plantation too.)

Brazil, of course, is bonkers for ethanol. Around 40 percent of the liquid fuel in the country consists of ethanol, according to the Brazil Institute. In 2007, the country produced 5 billion gallons of ethanol. A little over 71 percent of new cars are flex fuel cars while gas cars run on a blend of 76 percent gas/24 percent ethanol.

The concept of the Prisoner's Dilemma is pretty familiar to anyone who's taken an introductory economics course in college. Briefly explained, two co-conspirators are arrested and interrogated in different cells. The police, who have incomplete information about the crime, tell each conspirator their night will end in one of three ways: (1) each conspirator can confess, and they both receive moderate sentences; (2) each conspirator can remain silent, and they both receive extremely light sentences; or, (3) one conspirator can confess while the other remains silent, sending the confessor back to the streets while the silent conspirator receives a harsh sentence. Silence and confession are proxies for cooperation and defection. While both conspirators benefit more from cooperating, separated and self-interested, each tries to maximize their own gain at the expense of the other. As such, both defect - hoping the other remains silent - and receive moderate sentences. This outcome is suboptimal. The possibility of a different outcome emerges in an iterated version of this game. Tit-for-tat, a strategy developed by Anatol Rapoport, is premised on four essential conditions: a player (1) cooperates from the start, (2) defects if the other player defects, (3) cooperates in the next period, and (4) has a reasonable expectation the game will continue. The fourth essential condition means the player believes his or her long-term payoff from being nice, retaliatory, and forgiving will be great enough to offset the payoff loss from cooperating initially. While this strategy works for an infinitely iterated game, it fails at the introduction of a defined endpoint. If one or both players knows the next period, or the one after that, or even the one after that, is the final period, each will defect consistently and with reckless abandon. Now, consider the failure of the tit-for-tat strategy with the introduction of a defined end point in terms of the behavior of oil companies.

Each oil company takes part in a repeated, multi-player Prisoner's Dilemma. Action choices - the decision to cooperate or defect - are comprised of investment decisions and commodity pricing. If the game were infinitely repeated and constrained, that is, if the supply of oil were infinite in the presence of the current climate disaster, demand from the public and private sector for renewable energy sources would compel the oil companies to diversify. A tit-for-tat strategy, where diversification is cooperation and oil production ramp-up is defection, would prevail. Each oil company would initially pursue a strategy of energy diversification but, because oil is cheap and available, a defection could be punished by increasing supply and undercutting prices. Declining oil reserves, constrained supply markets, and rising commodity prices clearly signal a defined endpoint. In other words, oil is running out and all the major producers know it. As such, it makes sense that the major oil companies are largely foregoing the development of renewable energy projects, i.e. cooperating, in favor of increasingly expensive, high-risk projects such as those in Alberta, the Arctic Circle, and, in the near future, Brazil. Now, let's step back for a second and play a little game. Think about the names of the major oil companies and try associating those companies with different renewable energy projects or R&D operations. Okay, think a little bit harder. You've got Shell and the *cough* London Array, Chevron and WaveBob, the ConocoPhillips-Tyson biodiesel joint venture, BP Solar and the BP-GM hydrogen project, etc. Who's missing? Exxon Mobil, the world's largest non-state owned oil company, has a pathetically nonexistent renewable energy record. However, given what we know about defection in the presence of a defined endpoint, Exxon Mobil's strategic decision makes sense. Though the long-term payoff from cooperation is higher than repeated defection, a self-interested player will always try to maximize its payoff in the immediate round if it has some knowledge about the game's ultimate period. The other companies have little choice but to defect as well, lest they miss an opportunity to discover another oil field and maximize their share of the increasingly constrained supply market. Shell's recent decision to abandon the London Array in favor of pursuing development of Alberta's tar sands is a good example of abandoning the tit-for-tat strategy in favor of a defection cycle. Some game theorist's refer to this as the "death spiral."

Jeff Sachs, director of Columbia's Earth Institute and adviser to UN Secretary-General Ban Ki-moon, has warned that the E.U.'s biofuels policy may be having a disproportionate effect on global food prices compared with the American policy. European farmers give over only two percent of their total production to biofuels, though the types of grains used and the low surplus margins means this production has an outsized effect. Europe's constrained grain supply, much of which is sold in export markets, is becoming further constrained as land is diverted to rapeseed production. Rapeseed, the favored E.U. biofuel crop, is taking over wheat-specific land and cutting into that commodity's flow onto the global food markets. Sachs also criticized the E.U.'s 10 percent by 2020 biofuels target, saying it doesn't make "much sense in terms of the environmental effect, the energy balances or the food impact." Instead of food aid, Sachs has advocated development aid to help individuals in poor countries grow their own food to delink themselves from volatile global food markets. Climate Change Capital, a leading carbon-focused investment bank, has sold a nearly fifty percent stake in its operations to four investors. The stake, worth a reported £56 million, was picked up by investors including Japan's Mitsui & Co. Ltd. and the Universities Superannuation Scheme, a British pension fund. CCC, which has £1.5 billion under management, invests in renewable energy and low-carbon projects on behalf of companies requiring carbon reductions and offsets to come in under mandated carbon caps. Iberdrola is seeking a partner in the company's bid to acquire British Energy. The company will make a non-binding bid for 35 percent of the British nuclear company, though it needs a partner to come in under its €6.4 billion acquisition budget for 2008-2010. Germany's RWE has been tipped as a potential deal partner. The company's late stage push may be a sign it will focus its attention on the UK, where it's Scottish Power subsidiary is one of the leading power suppliers. With the possibility of abandoning the energy Energy East deal in New York looming, and pressure on regulators from French and German utilities to maintain same-company ownership of generation and transmission on the Continent, Iberdrola's hopes for expansion may likely be limited to the UK for the short- to mid-term.

Corn-based ethanol has jumped the shark. John McCain and 23 Republic senators have written a letter to EPA chief Stephen Johnson asking him to curb the Renewable Fuels Standard. The RFS, which Congress passed and President Bush signed into law in late 2007, requires the production of 36 billion gallons of ethanol in the U.S. by 2022. McCain, Sen. Kay Bailey Hutchinson (R-TX), and the rest wrote, “American families are feeling the financial strain of these food-to-fuel mandates in the grocery aisle and are growing concerned about the emerging environmental concerns of growing corn-based ethanol." Though the RFS mandates that only 15 billion gallons of the total may come from corn - presumably the rest will come from cellulosic, that is the same production level as the interim target set for 2015. While McCain has always been against ethanol subsidies, except when he wasn't, the backing of the other Republicans may prove decisive. Seven of the 24 senators on the letter voted in favor of the RFS in June 2007: Susan Collins (R-ME), Bob Corker (R-TN), Mike Crapo (R-ID), John Ensign (R-NV), Lisa Murkowski (R-AR), Ted Stevens (R-AK), and John Sunnunu (R-NH). 16 of the 24 voted for final passage in December 2007. The senators now argue that the $0.51 per gallon subsidy has distorted domestic agricultural markets, leading farmers to expand corn planting at the expense of wheat, soybeans, and other important agricultural commodities. This, in addition to the amount of corn given over to ethanol production - 30 percent and growing, according to the Department of Agriculture - has squeezed animal and human food supplies, driving up consumer food prices. Did somebody forget to tell the senators that the RFS only takes effect on January 1, 2009?

A committee of the European Parliament is expected to vote today in favor of unbundling the EU's power markets. The vote will force utilities to break the connection between their transmission networks and their generation sources. This is good news for private utilities in Spain and the UK, like Iberdrola, Centrica, and British Gas, who have long been stifled from breaking into the state-dominated markets in France and Germany. However, state-owned and formerly-state-owned utilities EDF and E.On are fighting back, endorsing a "Third Way" proposal allowing them to retain ownership, but devolve management to a transmission system operator. So-called "ownership unbundling" is aimed at greating more competition between power generators and lowering rates in pan-European power markets. It may lead to critical increases in infrastructure, though this point is likely secondary to the goal of opening markets. State intervention in the power markets isn't just a problem for the EU. Iberdrola has been trying for nearly a year to acquire Energy East, a utility in New York State. And for almost a year the New York Public Service Commission has put the Spanish company on hold over concerns they would raise rates on New York consumers. The problem is that New York State needs Iberdrola to help it meet its 24 percent RPS by 2013 - right now it's not even close. Fed up with the PSC's bumbling, Sen. Chuck Schumer has stepped in, saying "this is one of the most amazing things that I've seen. The PSC is being very stone-headed and not being very practical." Schumer is, of course, referring to the PSC's proposal that Iberdrola sell of its wind assets in New York before the acquisition. But the people urging the sale aren't consumer advocates or even consumers themselves - it's a group of "over 50 large industrial, commercial and industrial energy consumers with manufacturing and other facilities throughout New York State." (pdf). Progress gets a high five today. The Department of Energy plans to make $7.5 million in grants toward ocean power research and development. The commitment's terms, however, are embarrassing - even by Andy Karsner's standards. The DoE proposal requires private sector applicants to front 50 percent of the project cost, though they may split this cost with another project partner. Karsner expects to hand 17 awards, or about $440,00 per research team, or just enough for Andy to get his name on another proposal. While it's good the DoE is putting up money for ocean power, it's a slight decline from the nearly $70 million per year we were putting into this technology in the late 1970s and early 1980s.

India may suspend food futures trading amid growing concerns of speculative trading inflating commodity prices. Finance Minister Palaniappan Chidambaram told reporters at a meeting of the Asian Development Bank this weekend that "'if rightly or wrongly people perceive that commodities- futures trading is contributing to a speculation-driven rise in prices, then in a democracy you will have to heed that voice." Such a move is not unprecedented in India, where commodities markets are closed to overseas funds and thus strongly reflect domestic price pressures. The government banned futures trading on wheat and rice for a short period last year to control inflation, doing the same for lentils in 2006. The Finance Minister believes, however, that food price inflation is not tied to monetary inflation in this case. Instead, "�food being converted into biofuels is the single biggest reason why we are facing this crisis," he said at the ADB meeting. Constrained food supply isn't the only shortage impacting the commodities markets. Rolling power shortages in Chile, China and South Africa have forced some of the world's most active metals mines to cut production. Bloomberg estimates "the energy used by China's aluminum smelters each week could provide enough power for two million people for an entire year." Metals companies BHP Billiton, Rio Tinto and Anglo-American have all been forced to cut production, with Anglo-American leading the setback on a 10 percent drop in its South African operations. Barclay's research director Kevin Norrish commented, "problems in South Africa and China with electrical capacity are not just bad luck, but result from a lack of investment." While BT FInancial Group's Tim Barker says, "we've been through a period of 20 years when there hasn't been much built in terms of new capacity." With meteorologists predicting a hot summer, energy shortages in developing countries may increase as hydroelectric power sources cut production. As some supply-siders would have it, there is a trickle down effect to all of this. Production declines coupled with industrial-scale building booms in China and India have led to steadily rising construction costs. In March, high construction costs delayed the production schedule at REC's new polysilicon plant in Moses Lake. Input prices have significantly affected earnings results of at least one ethanol company. Finally, the high price of steel may have been a factor contributing to Shell's decision to drop out of the London Array project. It looks as though some developers - at least in the wind industry - are getting creative, relying instead on less-costly cement and examining the possibility of floating wind turbines that don't require steel monopiles.

Our weekly, continent-spanning list of greentech events. If you have an event to list for next week, e-mail me at englander at greentechmedia dot com. Also, a friendly reminder to register for Greentech Media's PV Annual 2008 on May 28 in Boston. May 5

• Schlumberger - Doll Research Center Tour, 2:45 p.m. - 5:00 p.m. @ One Hampshire St., Cambridge, MA
• Future of Energy: "Sustainable Mobility: An Automaker's Perspective on Transportation Energy & Climate Policy" with Susan M. Cischke, Senior Vice President, Ford Motor Company, 5:00 p.m. @ Science Center C, Harvard University, Cambridge, MA

May 6

• Energy Technology Innovation Policy Seminar Series: "Optimal Environmental Policies Under Economic Fluctuations," with HUCE Fellow Garth Heutel, 9:30 a.m. - 11:00 a.m. @ Belfer Center Library, Kennedy School of Government, Harvard University, Cambridge, MA
• Masdar Institute of Science and Technology Academic and Research Opportunities in Sustainable Technologies, 12:30 p.m. - 4:45 p.m. @ Bartos Theater at MIT, 20 Ames St., Cambridge, MA
• A Discussion with California Public Utilities Commission President Mike Peevey, 5:30 p.m. - 8:30 p.m. @ International House, UC Berkeley, Berkeley, CA

May 7

• Berkeley-Stanford Cleantech Conference Series: "Big Solar: Utility Scale Power Generation," 12:00 p.m. - 7:00 p.m. @ SRI Auditorium, 333 Ravenswood Ave., Menlo Park, CA
• MIT Energy Club Discussion Series: National Oil Companies, 6:00 p.m. - 7:00 p.m. @ Thirsty Ear Pub, Ashdown House, MIT, Cambridge, MA

May 8

• India's Increasing Energy Requirements: Possible Global Implications, with E.A.S. Sarma, former Power Secretary, Government of India, 12:00 p.m. - 1:30 p.m. @ 36-155, MIT, Cambridge, MA
• China Project Seminar Series: "One Country, Two Systems, One Environment: Environmental Cooperation between Hong Kong and Guangdong," 4:00 p.m. @ 100f Pierce Hall, Harvard University, Cambridge, MA

May 9

• California Clean Innovation 2008 FastPitch Business Case Competition, 7:00 a.m. - 7:30 p.m. @ UCLA Anderson School of Management, Los Angeles, CA
• Harvard School of Engineering and Applied Sciences: Conference on Materials & Structures for Energy, 8:15 a.m. - 7:00 p.m. @ Maxwell Dworkin Building, Harvard University, Cambridge, MA