Water

World’s first water futures contracts enter US financial markets

World's first water futures contracts US financial markets

Photo: PublicDomainPictures from Pixabay

Published

December 10, 2020

Country

Comments

0

Share

Published:

December 10, 2020

Country:

Comments:

0

Share

The world’s first water futures entered the financial markets in the United States. Investors won’t actually own water with the complex contracts they buy, but potential spikes in the benchmark price for California may spill over to expenses for ordinary people worldwide.

As planned, CME and Nasdaq have introduced a market for bets on California water prices. While investors in the United States don’t have the ability to buy actual water, they will earn or lose money through wagers on water futures. But the everyday changes in the valuations of the complex financial contracts may indirectly affect the prices charged to consumers and could even make it profitable for producers to lower the supply.

Critics say it is a step in monetizing a basic human right as the practice could spread throughout global commodity markets and fuel the ongoing privatization of water sources. Water conflicts are already intensifying all over the planet.


When their contracts expire, futures holders will buy commodities or electricity at a predetermined price. In the meantime, they can sell the securities to others. An investor buys the said financial contract if they believe the good’s price at settlement day will be higher than they are obligated to pay. There are also futures tied to stock market indices, bonds or other products. In this case, it is a California water price index and futures owners will cash in or lose the difference between the contract and the current market price at a set date.


Scarcity draws in market makers

California is a major water consumer and it was faced with water scarcity even before the recent record wildfires. Climate change is leading to a rise in temperature almost everywhere in the world and making droughts worse. Water shortages are paired with population growth while pollution is exacerbating the lack of access to the liquid essential for life.

Banks and investment funds are conquering the water market while most people have no money to gamble with

Some market operators and investors say farmers and local authorities in California can use the first-ever water futures to control expenses. Still, it is questionable whether letting banks and investment funds more directly into the market would benefit those who have no money to gamble with.

Making money from others suffering

“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… It’s the way in which capitalism makes profits from human misery,” Basav Sen from the Institute for Policy Studies told Earther.

Water usage rights are already being traded in California and other places. CME’s water futures are tied to an index of prices for immediate delivery that was introduced two years ago.

Comments (0)

Be the first one to comment on this article.

Enter Your Comment

Please wait... Please fill in the required fields. There seems to be an error, please refresh the page and try again. Your comment has been sent.

Related Articles

Rio Tinto to ship pilot lithium processing plant to Serbia from Australia

Rio Tinto to ship pilot lithium processing plant to Serbia from Australia

02 August 2021 - The company is finishing the preparations for the transportation of the processing plant despite mounting protests by Serbian citizens.

City Loznica Serbia spatial plan Rio Tinto Jadar lithium

Protests as City of Loznica in Serbia adopts spatial plan for Rio Tinto’s lithium project

29 July 2021 - Hundreds of people protested in Loznica in western Serbia as the local assembly was adopting the spatial plan for Rio Tinto's lithium project

Apply for exchange programme for coal regions in Western Balkans, Ukraine, EU

Apply for exchange programme for coal regions in Western Balkans, Ukraine, EU

29 July 2021 - The exchange programme is part of the Initiative for Coal Regions in Transition in the Western Balkans and Ukraine.

Rio Tinto controversial Serbian lithium environmental

Rio Tinto launches controversial Serbian lithium investment before environmental study

28 July 2021 - Rio Tinto keeps buying land in Serbia and getting permits for a lithium mine after the investment decision, but there is no environmental impact study