New bandits store blue gold in their vaults
Credits to Signe
Since the creation of the Water Act in 2007, Australia has never been the same. The driest continent on Earth has decided to put a price on water to improve its usage efficiency and reduce its waste. According to the Act, every year the authorities assess the amount of water available in each state, distribute half of it among consumers - farmers, industries, households - and let the price of the other half be decided by the market. You no longer need to own land to buy water entitlements in Australia: everybody around the world can easily purchase them through an app, being a trader in the City or a Swiss entrepreneur. The result is that, despite farmers have always been granted a percentage of water, the share dedicated to speculation has soared.
During periods of drought, when farmers need water the most, financiers on the other side of the world rub their hands hoping that the crisis will continue to increase their profits.
Since the introduction of the Water Act, financial institutions have been looking to Australia as a laboratory for testing the rules of tomorrow's world. The country believes in this way to save its intensive agriculture, its natural spaces, its way of life, but in reality, it is only accelerating the catastrophe. Right after the introduction of the Act, the water market was appreciated by Australian farmers for being an additional source of income: it was raining enough for them to trade part of their water entitlements.
Things have changed with the arrival of drought: the authorities have reduced the allocation of water for each farmer and prices have soared.
On average, in the New South Wales, prices have doubled over the past five years and so farmers’ debts to ensure the amount of water needed for their activity. Eventually, the price of water was so high and farmers’ water entitlements so small, that the final price of milk was incredibly high and the good remained unsold. Moreover, some rich Australian ecological foundations have bought tens of millions of litres on the market to preserve nature and this has driven up prices even further. Guess what? Many farmers went bankrupt.
Similar to what is happening with greenhouse gas emissions - company put a price on them and hire a sustainability manager that can drive them down over time - the most successful agricultural companies in Australia are hiring water managers: they are in charge of purchasing water quotas at the best price, store millions of litres of water in their reservoir and distribute - through an extremely precise system of pipes - the amount of water each tree needs, on the basis of air temperature, soil dryness and rain forecasts.
Water is a commodity, has a price that is established by the market and companies strive to maximize the profits it can generate.
There are four privately owned platforms sharing the value of this growing market (currently valued two billion euros) that retain a percentage of each transaction. In this context, climate change is a market variable, and water is a financial asset: when the weather service announces a few drops of rain for the week, the price of water goes down because farmers know they don't need to irrigate. If, on the other hand, an increase in temperature is forecast for the next seven days, then prices rise.
Investors, municipalities, farmers, and even environmental NGOs can buy water quotas and resell them after securing profits, rent them to farmers or store them in giant reservoirs (the blue gold vaults) while waiting for prices to rise. But who is actually purchasing the majority of these quotas? Australian and foreign pension funds, mostly Canadian, insurance companies and even some U.S. universities such as Harvard. Australian farmers call them water bandits.
Water markets are spreading to the rest of the world, with California being first on the list. Europe seems to resist but for how long? And even more importantly, how just and sustainable would this market be in the long run?
