[cashewchoo]

This might make it easier to quantify the effects of groundwater depletion and climate change. If we see that futures priced further out are more expensive, that says something.

In general, by the time something gets to being turned into financial instruments like this, the actual step from whatever state it was in prior to a regulated, standardized, liquid, public contract is generally good. Light is an excellent disinfectant.

[Klinky]

Except the market will lack perfect information, likely not price in long-term environmental damage, and encourage wealth hoarding via the literal pooling of wealth. Then you'll get crazy speculation, with the markets experiencing adverse liquidity events resulting in spectacular splash crashes afterward.

Markets quite often do not help usher in eras of rationale and logic. A lot of that goes out the window when "there's money to be made".

[dereg]

I do not understand your point as these contracts are settled in cash. Do you care to elaborate?

[h2o_enron]

I share the same concerns. Market economics did not prevent e.g. Enron from scalping millions of dollars out of CA energy markets while rolling blackouts resulted in powerless hospitals.

Speculation - not actual supply or demand - in oil markets drove the price of gasoline from $1 to $4 a gallon (and now back to $2). Everyone else paid for the inefficient market finding a false equilibrium pumped up by perception of security.

(Financial deregulation of Wall St in 1999 preceded the popping of the dotcom asset bubble by very little lag. And then CDS in 2005 and the Great Recession and now this whole mess: and the only solution is to pay cronies who didn't hoard enough cash?)

Sugar water companies can afford to push the price of water higher while the external health and commodity costs are passed onto everyone else.

Markets have thus far failed to solve for long-term environmental damage: their incentive is to externalize costs in order to maximize short-term profit.

[dnautics]

> Markets have thus far failed to solve for long-term environmental damage:

That's really not true in general. Market theory has been crucial in creating more sustainable resource usage in the US northeast fisheries, and the highly successful SOX and NOX emissions markets (acid rain really isn't an existential threat any longer). The US seems to be incapable of forming a sane CO2 market because of the rights intransigence and capture by fossil fuels, and the lefts reluctance to embrace a market solution/desire to overregulate (combining a methane/hfc greenhouse market with a CO2 greenhouse market is going to cause major arbitrage problems that could lead to greenhouse worsening)

[h2o_enron]

Climate change is real. Markets are not solving for that.

(Subsidies and market theory.)

Hopefully we can utilize market economics to incentivize sustainable development and head off currently accelerating environmental destruction with costs unrecoverable in a human lifetime. Markets absolutely have not solved for global warming. Take a look around: the arctic is burning; CA is burning; the severity, frequency, and costs of weather disasters are significantly increasing.

https://news.ycombinator.com/item?id=20925127

It is denial or delusion to claim that markets have solved or will solve for long-term environmental and thus economic sustainability.

Some firms - despite the current EPA's denialism, suppression, and appeasements of special interests - have chosen to forego short-term profits in order to achieve (voluntary) Paris Agreement targets. Unfortunately, markets are hardly reinforcing that good decision. Long-term ROI is beyond the attention spans of retail and institutional investors.

Unregulated free markets have resulted in smog-filled cities and polluted drinking water in very many economies.

Europe has had carbon credits for quite awhile. That's a good first step, but it's clearly not sufficient.

There could be yearly tokens for carbon, greenhouse gases, and toxic waste (e.g. the wastewater from washing out coal plants that the current administration has decided to allow to be dumped in our rivers). Speculators and do-gooders could drive up the prices of said tokens.

Is the market choosing the most energy-efficient cryptoasset when there's virtually zero switching cost and plenty of substitute assets? No. That market, at least, is choosing the least energy-efficient alternative; and it appears that nothing but a pan-industry "you can only waste renewable energy on that speculative margin" could be expected to result in capital allocation with long-term environmental security as a rational primary objective.

[h2o_enron]

Firm A: wildly profitable, stock price through the roof, dumping waste at zero cost

Firm B: profitable, blue chip, 100% green, files (e.g. GRI) Corporate Sustainability Reports

Which investors are factoring in the most important long-term factors in portfolio development? Markets are not optimizing for sustainability: policy is necessary to counterbalance profit motive.

Are we just using markets wrong?

Nobody likes penalties more than incentives.