Water has now joined oil and gold on the commodities market. This week, the Chicago Mercantile Exchange launched the United States’ first water market tied to California water prices.
“Climate change, droughts, population growth, and pollution are likely to make water scarcity issues and pricing a hot topic for years to come,” said Deane Dray, RBC Capital Markets managing director and analyst, as reported by Bloomberg. “We are definitely going to watch how this new water futures contract develops.”
For readers not familiar with how futures trading works, Nerd Wallet explains: “A futures contract is an agreement to buy or sell an asset at a future date at an agreed-upon price. All those funny goods you’ve seen people trade in the movies — orange juice, oil, pork bellies! — are futures contracts.”
The new water market was announced in September as a reaction to the year’s unprecedented wildfires. Advocates say the new market will quell farmers’ and municipalities’ uncertainty about budgeting for water. People made two trades the first day the market went live.
“Without this tool people have no way of managing water supply risk,” said Clay Landry, managing director at consulting firm WestWater Research. “This may not solve that problem entirely, but it will help soften the financial blow that people will take if their water supply is cut off.”
But opponents of the new water market scheme say considering water a tradable commodity jeopardizes basic human rights.
“What this represents is a cynical attempt at setting up what’s almost like a betting casino so some people can make money from others suffering,” said Basav Sen, climate justice project director at the Institute for Policy Studies, according to Earther. “My first reaction when I saw this was horror, but we’ve also seen this coming for quite some time.”
Image via Martin Str