'Horror' as water futures exchanged on US market as a commodity

Dow Jones
Wall Street is set to profit "from human misery", climate activists say. Photo credit: Getty

Wall Street is set to profit "from human misery", climate activists say, with water now being treated as a commodity on the US share market.

This week water futures appeared on the Chicago Mercantile Exchange, allowing investors to bet on its future price. According to nature news site Earther, run by Gizmodo, it will "allow farmers, hedge funds, and municipalities to essentially make wagers on the price of water and likelihood of water scarcity", just like they do already for gold and oil.

Water is a scarce resource in the US west, and prices can fluctuate wildly on the spot market. Futures markets allow buyers to lock in a price ahead of time, regardless of what happens with the spot price. If it goes up, they get to purchase the commodity at the agreed lower price; but if it goes down the seller wins, able to get more for the commodity than they would at the present market price.

Proponents say it will stabilise the price of water, making it easier for rights holders - including local government, electricity companies and farmers - to budget ahead. 

"California has long periods of dry conditions followed by short periods of very wet conditions, and that affects the price a lot," Patrick Wolf of Nasdaq Global Indexes told CNN.

But environmentalists are horrified. 

"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," Basav Sen, climate justice project director at the Institute for Policy Studies, told Earther.

"My first reaction when I saw this was horror, but we've also seen this coming for quite some time."

There are fears some investors will be incentivised to make water scarcer, driving the price up, so they can make a buck.

"It's the way in which capitalism makes profits from human misery," said Sen.

So far US$1.1 billion in contracts have been listed on the Chicago Mercantile Exchange, which launched the world's first financial and currency futures markets in the 1970s.

Fresh water shortages are expected to become more and more frequent as climate change dries up parts of the world.