CHICAGO. – Amid scarcity in California, water can now be traded as a commodity on the Chicago Mercantile Exchange (CME). With trading beginning on Dec. 7, the market allows farmers, hedge funds and municipalities to hedge bets on the future price of water and water availability in the American West. Announced in September, the ability to trade the resource was prompted by the area’s worsening heat, drought and wildfires.

“With nearly two-thirds of the world’s population expected to face water shortages by 2025, water scarcity presents a growing risk for businesses and communities around the world, and particularly for the $1.1 billion California water market,” said Tim McCourt, CME Group global head of Equity Index and Alternative Investment Products.

The contracts are quarterly through 2022, each representing 10 acre-feet of water, equal to roughly 3.26 million gallons. The index is driven by the volume-weighted average of the transaction prices in the Golden State’s five largest and most actively traded water markets. Overall, California is the biggest U.S. agriculture market and fifth-largest economy.

Those in favor of the ability to trade the resource present the argument that the new market will clear up a bit of the uncertainty around water prices for farmers and municipalities, and will allow them budget for water.

“I’m delighted we’ve had trades,” Clay Landry, managing director at consulting firm WestWater Research, which provides the data used to calculate the water index, told Bloomberg. “In the physical market, it’s so hard to get a deal done. This feels like lightning fast to me.”

The most recent acute dry spell in the state stretched from December 2011 until March 2019, according to the U.S. Drought Monitor. The most critical effects took hold in July 2014, with 58 percent of the region’s land suffering “exceptional drought,” leading to crop and pasture losses and other water emergencies.

However, some experts say treating water as a tradable commodity puts a basic human right into the hands of financial institutions and investors, a dangerous arrangement as climate change alters precipitation patterns and increases water scarcity. According to the United Nations, use has been growing globally at more than twice the rate of population increase in the last century, and an increasing number of regions throughout the world are reaching the limit at which water services can be sustainably delivered.

“What this represents is a cynical attempt at setting up what’s almost like a betting casino so some people can make money from others suffering,” Basav Sen, climate justice project director at the Institute for Policy Studies, told Earther. “My first reaction when I saw this was horror, but we’ve also seen this coming for quite some time.”