What does it mean for water to have a value on the Wall Street market?

water market wall street
Water is considered one of the most important resources in the world.

An issue that has caused a stir, is undoubtedly the issue that the water will be commercialized, in the face of an alleged crisis of shortage of the vital liquid, but experts say that the idea is not so far-fetched

Some are against it, but experts defend that the financial project can contribute to a more efficient water management.

Will now have a price

It is not news that this resource is involved in issues of money and exploitation, since both global warming and the hand of man have considerably decreased its quantity.

At the beginning of this week, water began to trade on the Wall Street market in California, as if it were oil or wood.

Some experts assure that it should not be thought negatively, that, if used properly, this financial mechanism could even help in a more efficient use of water.

How can you buy a common good like water?

In almost every country in the world, laws protect water as a common good of humanity. However, it is possible to grant the right to sell it, which would previously be done through administrative licenses.

It should be noted and clarified that what has begun to be listed on Wall Street is not water itself, but the rights of its use.

“This has always worked informally in all parts of the world with an irrigation system, also in Spain,” said Gonzalo Delacámara, director of Water Economics at the Imdea Institute.

Read also: Water suffers a global crisis, it will be sold on the international market

He added, “an irrigator A tells B, this month I am not going to irrigate, I give you my rights in exchange for compensation.” What is much less common is the existence of a formal market for these rights transactions.

How do the markets for the use and exploitation of water work?

In much of the United States, they tend to have a fairly hot climate, increasing the risk of drought; Therefore, markets have been developed to carry out transactions of this type.

“When a right to use and exploit water is generated, there is on the one hand what we could call the natural resource path, the most important, the water that allows maintaining ecological flows and supplying cities like Los Angeles,” said Delacámara.

Thus, for example, farmers can exchange water use rights, to have with which to irrigate their crops; but, of course, there are also others who are looking to earn money with the important resource.

How does the market where water is traded work?

In these types of markets, also called derivatives or futures markets, the exchanges are long-term.

In areas of extreme water scarcity such as California, a person may not be interested in purchasing water at that time, however, they may “set aside” a certain amount for future use.

How can you help humanity by selling water?

“In theory, in this way what you are doing is creating incentives for people to be more efficient; This is due to the fact that the excess water rights can bring them to the market ”, explained Delacámara.

In addition, according to the director, it can serve to ensure that the water that is available can reach where it is needed.

What can eventually finance investments, aimed at conserving the resource.

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