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Kendra Mills

May 27th, 2021

Human Rights and the Financialisation of the US Water Market

0 comments | 7 shares

Estimated reading time: 10 minutes

Kendra Mills

May 27th, 2021

Human Rights and the Financialisation of the US Water Market

0 comments | 7 shares

Estimated reading time: 10 minutes

Early last December, water futures were traded on Wall Street for the first time in history. Introduced by CME Group, the contracts are linked to the California water index and intended to measure water scarcity for major consumers (Chipman, 2020). The UN Special Rapporteur on the right to water condemned the creation of a water futures market, concerned that it would invite speculative trading (OHCHR, 2020). However, proponents of the water futures market contend that futures trading will safeguard water access as the American Southwest experiences increasingly dangerous droughts (Fickling, 2020). What both parties fail to acknowledge is that, regardless of its efficacy, the water futures market represents another frontier at which the state retreats from its obligations to the public and normalises the intercession of private interests into the distribution of an essential resource. Human rights practitioners are familiar with the concept of progressive realisation and the significance of norm-building. The water futures market embodies a progressive degradation of our recognition of water as a vital public good. Also, the financialisation of water resources cannot be extricated from its context: though a water protection bill has recently been introduced in Congress, the US has a demonstrable record of contempt for the equal allocation of water resources.

California’s water management systems support the country’s most populous state of 40 million residents, as well as millions of acres of irrigated farmland, and CME Group has directed their marketing materials primarily to California farmers (CME Group, 2021). The process of futures trading is meant to proceed thusly: during January, farmers will purchase futures contracts for their anticipated water shortfall, for example, 100 acre feet of water. If the spot price (the actual price of water rights) and the futures price are each at about $500, farmers will post margin, paying a percentage of the $50,000 total price to secure their position. If the spot price and futures price have risen when they later require that water, farmers will close their position and sell their futures contracts the day prior to purchasing water rights, having offset the increased spot price with the sale of their futures contracts.

Beyond the UN, multiple outlets have observed that the creation of a water futures market could lead to speculative trading (Tappe, 2020; Hodgson, 2020). If hedge funds and banks were to bet on water futures contracts, driving up the price, the futures price could influence the spot price and provoke an affordability crisis for the state of California, repeating in miniature the global food crisis of 2007 when, as a result of commodity trading, grain prices soared, exacerbating global hunger (Kaufman, 2011). Burgeoning water prices could threaten food production, reduce the performance of California’s environmental protection programs, and increase the costs of urban living, precipitating a cascade of potential human rights violations (Public Policy Institute of California, 2019).

However, analysts have discounted the possibility of trade-induced price inflation. Washington Post contributor David Fickling argues that water’s abundance and weight preclude it from becoming the next site of global commodities investment, therefore decreasing the likelihood of speculative activity (2020). Fundamentally, water is difficult to ship and, relative to other major commodities, easy to acquire. In a column for Global Water Intelligence, Christopher Gasson concurs and asserts that water is only valuable if it is used, thereby necessitating that investors commit to its distribution (2021). Camilla Hodgson joins them in the Financial Times, stressing the significance of the limits imposed by the water market’s modesty and inherent regionality (2020). In 2019, just over 200 transactions were made in the water rights spot market in California, a miniscule number in the context of global commodity trading (Hodgson, 2020). Further, water scarcity in the American Southwest is not necessarily a meaningful indication of global water scarcity. Ultimately, it is likely that the localised nature of the California water market will insulate it from injurious speculative activity. Furthermore, several analysts anticipate that CME’s projections will hold true, allowing futures trading to operate as a means by which to improve the distribution of water resources.

Despite these innate counterchecks, the increased financialisation of water is nonetheless worthy of scrutiny. The futures market is just one factor in California’s water management, which has for decades been marked by profiteering and privatisation. The state’s water rights spot market is labyrinthian, often capricious, and attracts exploitative private investment. Almarai, a Saudi Arabian agricultural conglomerate, owns 15,000 acres of California farmland and, with the protection of a 150-year-old claim, enjoys unrestricted access to the Colorado river (Markham, 2019). Harvard University’s endowment manager has also been accruing water rights in California, with the value of their investments almost tripling in five years (Gold, 2018). And several million state residents rely on privately held facilities for the distribution of their daily water (Water Education Foundation). These are among the entities most likely to benefit from the water futures market, while small-scale users are expected to be marginalised (OHCHR, 2020).

In July 2020, the previous Special Rapporteur on the right to water issued a report for the UN General Assembly which noted that “the financialisation of the water and sanitation sector creates a disconnect between the interests of the company owners and the goal of realising the human rights to water and sanitation” (UN General Assembly, 2020: 8). The same report also indicated that private sector involvement in water distribution tends to exacerbate inequality of water resources, as private entities only allocate services to areas that provide financial returns (UN General Assembly, 2020: 17). Researchers at UC Irvine confirm this analysis, finding that low-income and rural communities are disproportionately affected by water quality issues (Science Daily, 2018). Water futures trading is merely one aspect of increased financialisation, which is itself simply one element in the processes of privatisation. But, even if financial analysts are correct in their predictions that the water futures enterprise will have a positive impact on water distribution, futures trading will legitimate the ongoing advancement of governance by market logic and the detachment of water management from human rights priorities.

The Water Affordability, Transparency, Equity and Reliability Act was recently reintroduced in Congress; if it passes, it will fund the improvement of water infrastructure and includes language that prioritises disenfranchised populations (Congresswoman Brenda Lawrence, 2021). It remains to be seen if the legislation will be signed into law or if the subsequent application is effective in its mandate—there is ample historical precedent to suggest that state funds are often monopolised by subcontractors and consultancy firms to the detriment of the beneficiaries of the appropriated funding. While the WATER Act is promising and stands in contrast to the futures market and its intrinsic prioritisation of investment interests, it arrives after decades in which the US made evident it’s lack of commitment to the equitable distribution of water resources.

Beyond California’s perpetual droughts, the US is no stranger to water emergencies. The winter of 2021 alone saw disastrous mismanagement of water resources in Texas and Mississippi. In the past decade, there have been a number of contiguous water crises, often affecting Black, indigenous, and immigrant communities at disproportionate rates (National Resources Defense Council, 2019). Perhaps most notoriously, the Flint crisis exposed the country’s indifference to basic water needs of its citizens. Newark subsequently experienced an identical lead-poisoning crisis, while in Alabama the failures of wastewater management in another primarily Black community has provoked a public health disaster that the UN Special Rapporteur on extreme poverty indicated was unprecedented in a ‘developed’ country such as the US (Okeowo, 2020). A 2019 report by the US Water Alliance also found that indigenous Americans were the most likely of any demographic to be disenfranchised of water access (2019). In the Navajo Nation, tribal members are sometimes required to travel for miles to purchase water that is fit for consumption, as the groundwater has been tainted by abandoned uranium mines (Morales, 2019).

In a history filled with neglectful management of water, the introduction of a water futures market represents an implicit hierarchisation of profit motives above fundamental human rights. More research will be needed to understand how the water futures market actually affects the distribution of water, as well as its overuse, as its current structure offers little incentive for usage reduction (Hodgson, 2020). In the event that the futures market functions as envisioned by CME group, its positive impact would nonetheless entrench the encroachment of private interests into the distribution of a vital public good. Despite an increasing appreciation for the significance of global business to the realisation of human rights, states remain the ultimate guarantors of those rights, and the volatile, profit-driven logic of private investment is not an acceptable equivalent.



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Fickling, D. (2020, December 09). Analysis | Why Water Won’t Make It as a Major Commodity. Retrieved January 31, 2021, from

Gasson, C. (2021, January 7). Global water intelligence. Retrieved February 04, 2021, from

Gold, R. (2018, December 10). Harvard quietly amasses California vineyards-and the water underneath. Retrieved February 04, 2021, from

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Markham, L. (2019, March 25). Who keeps Buying California’s Scarce Water? Saudi Arabia. Retrieved February 04, 2021, from

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Congresswoman Brenda Lawrence (2021, February 25). U.S. reps. Lawrence and Khanna and Sen. Sanders reintroduce the water act to address water justice in America. Retrieved March 06, 2021, from

US Water Alliance. (2019). Closing the Water Access Gap in the United States. Retrieved February 04, 2021, from

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About the author

Kendra Mills

Kendra Mills is a recent graduate of the LSE Human Rights program. She is interested in alternative justice projects, data sovereignty, and solidarity.

Posted In: Business | USA

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