In finance, as in climate change, sometimes there are tipping points. In 2004, the Chicago Mercantile Exchange (CME) traded a modest $2.2 billion in weather futures obscure derivatives that are linked to temperatures in 29 cities worldwide and that enable traders to bet on hot or cold spells. But the weather was unusually volatile in 2005: drought and floods in Europe, record heat in Australia and an active storm season capped by Hurricane Katrina in the U.S. By the end of the year, CME had traded $36 billion in weather futures.
Since then, the boom in bets...
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