The first-ever official shortage on the Colorado River has intensified a debate over how to provide water for 40 million people across the Southwest and irrigate fields of thirsty crops like wheat, cotton and alfalfa. Few voices outside government are more influential than that of the Walton family, billionaire heirs to the Walmart Inc. fortune, who have long advocated water markets as a key part to solving the region’s woes. But some environmental groups say the Waltons drown out other, nonmarket approaches.
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.