California’s increasingly volatile warming climate is making droughts more intense, and complicating water management. A just-launched commodity futures market for the state’s water provides a new tool for farmers, municipalities and other interested parties to ensure against water price shocks arising from drought-fueled shortages. Taking a Wall Street approach to an essential natural resource has prompted both fear and hype. Will California experience a new Gold Rush in water? Will speculation boost the cost of water? Perhaps both the fear and the hype are unwarranted.
-Written by Ellen Hanak, economist and director of the Public Policy Institute of California’s Water Policy Center.