Arizona PBS azpbs.org 23 Feb, 2021 23:45 am

Investments in California’s water may help lower costs during drought

Investments in California’s water may help lower costs during drought
Some California farmers are hopeful opened economic options will help balance high water prices during the summer, while extreme weather and droughts continue.

(Photo by Marcia Cripps/Unsplash license) Climate change and extreme weather events are forecast to further reduce water supplies in the American Southwest, and a new futures market could allow water users to recoup losses if the price of water spikes.The water futures contract trades the price of water and investors do not determine who has water or the amount of water distributed in a given region.“You’re not trading water rights, you’re trading the price of water.The pricing of water futures is linked to the Nasdaq Veles California Water Index, which prices futures based on the weighted-average price of water in five of the most traded water markets in central and eastern California.

“If you’re going to leave it to an opaque system, where nobody knows what the prices are and nobody knows what’s happening, that’s when things fall apart,” Coogan said, referring to the fluctuating price of water throughout the year.As demand for water increases and long-standing drought conditions reduce water supply, Kelley said, the price of water likely will increase in midyear, when crops need water most.

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