By Lucy Ren<\/p>\n
Known for his invention of\u00a0 financial futures and carbon trading, environmental economist Richard Sandor predicted on Tuesday that Western drought will lead to the launch of a U.S. water futures market as soon as\u00a0the next\u00a0year.<\/p>\n
Scarce resources like water and air will replace crude oil\u00a0as the most important commodities of the 21st<\/sup> century, Sandor said at the University of Chicago’s\u00a0Gleacher Center in downtown Chicago, during a presentation about his new book, Sustainable Investing and Environmental Markets: Opportunities in a New Asset Class.<\/p>\n <\/p>\n Sandor said he has been \u201cencouraging the coming of the water market,\u201d and that the Commodities Futures Trading Commission\u00a0is developing an algorithm to separate the price of water as a life necessity from the price of the water as a commodity.<\/p>\n \u201cWe are on the verge of breaking into water markets in the world,\u201d Sandor said.<\/p>\n Sandor has been a\u00a0leading advocate\u00a0of \u201cputting a price on nature,\u201d specifically as a way to assure sustainable uses of\u00a0natural resources.<\/p>\n He stated that water trading in the U.S. is currently disguised in the form of\u00a0commodities trading, for livestock and crops require large amounts\u00a0of water. For example, he said,\u00a0a pound of corn requires 55 gallons of water, and a pound of wheat, 156 gallons.<\/p>\n Sandor said that California, now facing one of the most severe droughts in its history, has drawn great attention to the problem of water\u00a0resources and the possibility\u00a0of water trading in the U.S.<\/p>\n On a related note, Sandor\u00a0said a looming shortage of water in China, which is home to 20 percent of the world\u2019s population but only 7 percent of its\u00a0water, also calls for the commoditization of water.<\/p>\n \u201cI think water quantity and water quality trading will go on and will emerge out of the drought in California,\u201d Sandor said. He hopes the innovation would then spread to China, where the greater water deficit exists. \u201cI want to go over there and educate,\u201d he said during an interview after his talk.<\/p>\n \u201cI would put forward the hypothesis that California and China will lead the way in climate change policies and legislations,\u201d Sandor added.<\/p>\n Sandor said the recent evolution in wealth creation, which was guided by fundamental structural and technological changes, could be summarized by different \u201ceras of commoditization,\u201d ranging from the invention of financial instruments like the interest rate futures contract in the 1970s and 1980s, to the \u201ccommodification of data\u201d since the mid 1990s, led by the birth of the Internet and booming of technology companies.<\/p>\n Calling it \u201ca field of dreams,\u201d Sandor\u00a0said commodities trading in Chicago can send signals regarding \u201cwhen and where to build a grain elevator in North Carolina.\u201d<\/p>\n \u201cThe history of the grain markets was,\u201d Sandor said, \u201cpricing first, and then infrastructure investments will follow,\u201d\u00a0rather than the reverse.\u00a0He asserted that market signals from water trading would provide similar cost-effective solutions to water shortages and pollution.<\/p>\n During a Q&A session, Sandor responded to a listener’s concern regarding trading basic life necessities like water, by stressing that the discussion of pricing applies only to water consumption above and beyond the needed amount for basic hydration and hygiene purposes.<\/p>\n \u201cIt\u2019s interesting to learn that one solution to the environmental problem is financial markets,\u201d said Jeffrey Jahns, an attorney who attended the event. \u201cThere is a lot of work, and I think it\u2019s important\u00a0to have\u00a0people like Richard who are always putting in front of policy makers opportunities for solutions to environmental problems.\u201d<\/p>\n The meeting was sponsored by the University of Chicago Law School, where Sandor\u00a0is a part-time lecturer in the\u00a0 law and economics program.<\/p>\n By Lucy Ren Known for his invention of\u00a0 financial futures and carbon trading, environmental economist Richard Sandor predicted on Tuesday that Western drought will lead to the launch of a U.S. water futures market as soon as\u00a0the next\u00a0year. Scarce resources like water and air will replace crude oil\u00a0as the most important commodities of the 21st […]<\/p>\n","protected":false},"author":29,"featured_media":16001,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27,436],"tags":[],"class_list":["post-16000","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-spring-2015"],"yoast_head":"\n