Water: too precious to be just another commodity? | FT Rethink
Water is life, but in a warming world, it’s in ever shorter supply. California and Australia have active markets allowing investors to bet on its fluctuating cost. The FT’s Gill Plimmer explores whether water really is just another commodity, or an essential human right. And can private models of ownership still provide water to all those who need it?
Water is life. But as the world warms up,
it’s also increasingly becoming a commodity. For example, the Nasdaq Veles California Water
Index Futures was launched in 2020, allowing investors, farmers and municipalities to bet
on the forward cost of water in California — and hedge against any price rises
Australian farmers are also trading water in a $1.4bn market in allocations from the
sprawling Murray-Darling river basin. Landholders are free to use or sell their
parcels of river water, the value of which rises or falls according to the price of
crops and whether any rain is forecast. Critics of these financial models say that
clean water is an essential human right and should be paid for by the state. They also
believe that speculative trading could distort water prices for everyone, meaning some people
may struggle to afford it. Others believe that putting a price
on water and encouraging private models of ownership will ensure its conservation.
One of the biggest experiments in water privatisation has taken place in the UK. In 1989
the government sold off the entire water system of England and Wales to limited companies.
More than 30 years later that system is being criticised across the political spectrum.
Chief executives have been awarded hefty pay packages, shareholders generous dividends,
and investment in infrastructure has not kept pace with population growth leading to sewage
flooding and pollution failures. Just 14 per cent of rivers meet the
minimum European standards for water quality, for example.
The largest market for investors may be in providing new technologies
such as desalination or recycling plants. Desalination plants can be costly investments,
because they use a lot of energy to run, but the global industry wants to power
a fifth of new desalination plants using renewable energy between 2020 and 2025.
Other innovations include the “Seawater Greenhouse”, which uses seawater and solar
power to create cooler, more humid conditions for greenhouse-cultivated crops in arid regions.
Half of the world’s population is expected to be living in water-stressed regions by 2050.