Water Is Not a Commodity

By Mike Smith

Late last year, an index – much like the Dow Jones Average – was created to track the value of California water. It is called the Nasdaq Veles California Water Index. According to a spokesperson for WestWater Research, who sponsored this index, “Having this index is a great step forward for the public markets and for using the power of the marketplace to better understand water as a commodity.”

The financial folks love to have something to trade for profit and really don’t care if it is based on the value of companies like the Dow Jones or your kid’s marbles. However, when water is treated as a commodity we need to be concerned.

Water is not a commodity. Though the chemical composition may be the same, water’s value varies widely by location, time, purity, and use. We are seeing this played out now when developers are gaining control of agricultural water and moving it to another place so that more homes can be built. We also see it in the battle to preserve appropriate flows for the natural requirements, or in the planting of perennial crops in a desert.

Further, water does not react beneficially to market activity like, say, carrots. If some disturbance in supply moves the price of carrots up, farmers will plant more, and folks will shift to beets. Not so with water where the supply is constrained and there are, for many uses, no substitutes. When water is treated as an unregulated market commodity, the highest bidder is the winner; the losers are the natural environment and any user whose funds are limited.

The CDP Platform and State law establish that access to safe, affordable water is a basic human right. Treating water as a commodity is contrary to both.

The Water Policy Discussion Group – an informal element of the Rural Caucus and Environmental Caucus – has opened a discussion on this important subject. The objective is to consider a legislative or administrative change so that water will not be treated as a commodity and the distribution will be governed by thoughtful regulation rather than price.

Ultimately, we will all benefit from a reconsideration of California’s water law, which was developed in the days of gold mining and cattle barons. Meanwhile, we need to reduce or mitigate the more negative symptoms that the current law presents – such as allowing treatment of water as a commodity.