Renewable energies represent an increasingly important investment theme. Many of the biggest market winners these days are directly leveraged to renewables. Less direct beneficiaries include technology companies whose products are key to hyper-efficient smart cities.

And let’s not forget electric vehicles (EVs), if you can stomach certain risky stocks. But there’s a less volatile play on EVs and therefore renewable energies. It’s a crucial commodity that all EVs need: copper, aka the “red metal.”

Why Renewables Are Important

Transitioning to renewables is urgent. That’s not just because of climate change but also because of resource scarcities, including fossil fuels. The current glut in oil is deceptive. It stems solely from fracking. But while fracking has added more than 7 million barrels a day to the world’s oil supply, it has generated cash losses of hundreds of billions of dollars, a tip-off that over the longer term fracking is a road to nowhere.

The key substitute for fossil fuels is electricity, which can be generated by renewable energies such as wind and solar. Unfortunately, the U.S. has gotten far too complacent about ensuring we’ll have the resources needed to build out renewable energy infrastructure. In contrast to China, we have no major government focus on this area.

Evidence for Scarcity

What’s the evidence of resource scarcities? The market’s behavior, for one. It’s telling that gold has been this century’s top-performing asset. Investors intuitively know that in the face of commodity scarcities, paper currencies become inadequate to the task of allocating different commodities.

Gold is uniquely positioned to take on this job. Not only is it universally valued, but it doesn’t have major uses in industry, meaning it’s not subject to becoming scarce itself, undermining its ability to function as a currency.

But if gold’s strength signals commodity scarcities, it isn’t the only commodity to outperform stocks (including with dividends reinvested) this century. Silver, copper, and iron ore have outperformed as well. Significantly, their outperformance is associated with a decline in reserves that can be mined.

You might think that’s to be expected, since it makes sense that price gains would stem at least in part from rising demand and therefore logically should lower reserve life. But if current or looming scarcities weren’t an issue, reserves should rise along with prices, because the higher prices would make it profitable to mine reserves that previously would have been too costly to bother with.

A good definition of scarcities, in fact, is when rising prices fail to lead to reserves rising fast enough to assure that mining can increase at past rates. That was the case for the three outperforming industrial metals.

And this is worrisome because all three – silver, iron ore, and copper – are integral to the transition to renewable energies.

Copper’s Useful Properties

Copper is a superb conductor of both heat and electricity, not quite as good as silver but far cheaper and more widely used. Copper’s role in an electric world is second to none. It’s used in most electric cables and in virtually all high- and ultra-high-voltage cables, and is essential in EVs.

Indeed, battery-powered cars require up to 200 pounds of copper compared with less than 50 pounds for cars with internal combustion engines. The electric battery, which is the heaviest component of an EV, is nearly 10% copper.

During this century, copper reserves have declined by about 12 years. The construction industry accounted for the biggest portion of demand, eclipsing transportation and electrical wiring combined. But in the coming generation, electrical and transportation promise to far surpass construction.

No one seems to be asking where all that copper will come from. That’s worrisome. But for investors, finding the right copper stock could bring multi-fold returns.

Next year, as the world economy resumes growth and infrastructure spending explodes, so will demand for copper. For our favorite investment play on this crucial commodity, click here now.