Free water is a vital resource that we all need in order to survive, thrive and develop. Whether it’s about achieving healthy sanitation or living in luxurious hotels, water is everywhere. It’s so important that in the year 2010, United Nations General Assembly recognised the right to water as a basic human right (under its resolution 64/292). Under this, everyone is entitled to “have access to sufficient, safe, acceptable, physically accessible and affordable water for personal and domestic use.”
Even though we have observed a considerable progress (from 75% in 1990 to 91% in 2015), around 666 million people around the globe still lack access to improved water resources. Further, 29% of the people don’t have access to safe drinking water. In addition to that, a study conducted by University of California Irvin highlights that 21 of the 37 major aquifer systems in the world have now passed the sustainability tipping point of depletion. It has been identified that “a third of all major groundwater basins on Earth are under stress due to unsustainable human consumption.”
With escalating demand and decreasing water resources, water can now be considered no less than gold (in value). S&P 500 Global Water index has been outperforming the bellwether gold and energy indices for a long time now. Water now has also become a reason for growing unrest and global conflict. Being the major factor for conflicts in 45 countries around the world, depleting water resources, if not wisely managed, can become a national security threat too.
Moving To Trade Water
Recently, the state of California has been in news due to a completely new but obvious ramification of the phenomenon of depleting water resources. There has been an observed futures market for contracts over nothing else but water. Now, farmers, hedge funds and municipalities can bet on the future price of water. Often, hedging or futures trading in stock market is used as a tool for surviving any mishap in your return on investment prospects.
On similar lines, Chicago-based CME group claims that, “Futures will help water users manage risk and better align supply and demand.” With futures being financially settled as opposed to actual physical delivery, only time will tell if such market developments are going to keep increasing the water scarcity or control it. But, the recent statement given by top official of the United Nations, that “the news that water is to be traded on Wall Street futures market shows that the value of water, as a basic human right, is now under threat” does raise come concerns.
The State Of California
The west coast of United States has been ravaged by wildfires and eight-year-long draughts. California is also the largest consumer of water in USA. Introduction of mechanisms to ensure risk free trading is, therefore, obvious in the context of such states. However, the question is: will the introduction and expansion of trading commodities that are actually being labelled as human right be wise in terms of human development and decreasing inequality gap?
We all know that futures trading will enable people to price the resource available in future, in the present itself. The question then arises if the introduction of trading innovations exploit water resources for the benefits of some profit-oriented traders.
And as we know that water resources are constantly depleting, will this depleting resource force poor population in future to pay more than the people who have already acquired the future stock in advance at a much subsidised price? If yes, then we are moving towards a possible water inequality.