As the world’s climate shifts, the shape of our future becomes more and more uncertain. However, Wall Street is poised to make a profit out of this uncertainty, by allowing water to be traded just like any other commodity.
The ‘water market’ — the first of its kind in the world — launched last month on the Chicago Mercantile Exchange, according to Bloomberg News. All in all, it opened at roughly $1.1 billion in contracts tied to water prices in California.
Trading water
“Climate change, droughts, population growth, and pollution are likely to make water scarcity issues and pricing a hot topic for years to come,” RBC Capital Markets managing director and analyst Deane Dray told Bloomberg.
“We are definitely going to watch how this new water futures contract develops.”
Such a market would allow anyone to bet on the future price of water and its availability in the Western US by buying shares. It was opened largely due to the massive wildfires that have swept the country last year, and the rising temperatures and drought levels associated with it and climate change, as water has become more and more a scarce commodity.
The question, as always, remains — is this a good thing? On the one hand such markets can do a surprisingly effective job at keeping prices and supply stable; nobody wants to lose their money, after all. The hope is that traders will give officials a better idea of the actual price of water in the future, allowing them to get the best deals and ensure that the people have access to water no matter what happens.
But on the other hand, nobody wants to lose their money, which can become a problem when we’re talking basic essentials such as water. Trading could promote a competitive mindset where profit, not proper public access and availability, becomes the name of the game. The economy can often thrive at the expense of the environment, and treating water as a tradeable commodity can quickly become a slippery slope, especially as water security is viewed as one of the largest hurdles we’ll have to overcome in the future. Climate change is also going to make matters worse, as it affects precipitation patterns and promotes drought.
“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, for LA Times.
“My first reaction when I saw this was horror, but we’ve also seen this coming for quite some time.”
Is this a sign for what’s to come the world over? Right now, we don’t know — it could very well be. California finds itself in a pretty unique setting. The state is relatively dry but well populated, rich, and has strong industrial and agricultural sectors. All of this leads to sizeable competition for water at affordable prices between household users, economic actors, and (especially in the wake of the wildfires) environmental needs.
It is hoped that the implementation of the water market will lead to lower prices and a better distribution of the vital resource. Time will tell if this is a good idea, or not.
