By Andrey Dashkov, analyst, Casey Research

Andrey Dashkov

From precious and industrial metals to “hard tech” used in electric vehicles… as well as wheat, coffee, and fertilizer… every tradable commodity is going up.

Making this one of the best times to invest in the commodities sector.

But there is one asset that few investors have on their radars.

And it could deliver some of the biggest gains in the coming months and years.

Why?

First, it’s part of a multitrillion-dollar megatrend.

Second, it’s entering a “Super Spike” window (which I will explain below).

I’m talking about carbon.

It’s one of the most abundant elements out there… so abundant, in fact, that governments across the world want to limit how much carbon the global economy produces.

As a result, the price of carbon allowances – the rights to emit this element into the atmosphere – has been soaring.

Let’s take a closer look…

Carbon Allowance Outperformed Broad Markets

Over the past three years, this little-known investment has completely decimated the S&P 500. While the most popular U.S. stock market index lost about 2.5% over the past year, carbon has delivered a 54% return.

To be clear, by “carbon,” I mean carbon allowances traded within a greenhouse gas emissions market such as the European Union Emissions Trading Scheme.

As a reminder, greenhouse gas emissions rights give industries the permission to put a specific amount of greenhouse gases in the atmosphere.

I wrote about this in January:

Think of this allowance as: “How expensive is it to emit greenhouse gases?”

Businesses must decide how much they would pay to emit one tonne of CO2 equivalent… without damaging their bottom lines.

And emitting one metric tonne of carbon dioxide equivalent has become almost three times more expensive over the past year.

This is a sign of the things to come…

As the world is moving toward its “green” goals of achieving net-zero emissions, both governments and investors will continue making it more difficult to emit greenhouse gases.

The rise of carbon allowance prices over the past 12 months says one thing…

Even though oil and gas have been some of the hottest investments this year, carbon allowances still have investors’ attention.

Carbon Is Part of the Commodity “Super Spike”

David Forest, our commodities expert, defines “Super Spikes” as “periods in history when hard asset prices surge violently. These spikes make investors who position themselves early rich.”

We are looking at one of the best setups for a Super Spike in almost every commodity out there… including carbon allowances.

As a reminder, these five factors produce Super Spikes:

  1. Rising liquidity and money supply.

  2. Investor enthusiasm.

  3. Major shifts in society.

  4. “X-factor” events.

  5. Extreme supply shortages.

First, as I showed last week, corporate America is flush with cash.

So there is plenty of liquidity available in corporate treasuries for investment opportunities.

And buying carbon emissions rights will ensure that emitters can continue manufacturing their products without crossing any environmental red lines.

Second, carbon’s price performance (as reported by Bloomberg) shows that investors remain optimistic about this asset class.

For instance, analysts predict that carbon allowance prices could increase by up to 20% by 2024.

Third, the world is moving toward renewable energy and clean production.

For example, in April of this year, the U.S. generated a record 20% of its total energy output from wind and solar. And the U.S. Energy Information Administration (EIA) predicts that renewable energy generation will increase from 22% at the end of this year to 23% next year.

By 2050, renewables could supply up to 44% of the country’s energy. So the massive green transformation is alive and well.

Fourth, “X-factor” events like the war in Ukraine made some of the biggest energy buyers on the planet accelerate their renewable energy goals. For example, Germany will stop buying Russian oil completely by the end of this year. Poland, which is a heavy consumer of coal, accelerated its investment in offshore wind.

All of these will make it harder to emit greenhouse gases, raising the demand for carbon allowances.

Fifth, global emissions rights are in short supply by design. They were created to limit the volume of greenhouse gases emitted into the atmosphere.

Also, the bodies governing emissions trading systems set limits on how many rights they issue. So their supply decreases over time.

For example, in the European Union, the limit on emissions in 2005 was set as a baseline. In 2020, the cap on emissions was set at 80% of that amount. By 2030, it will be at 57% of that amount. So in 2030, the volume of emissions available will be less than one-half of that in 2005.

As a result, this market is almost guaranteed to remain in a state of short supply forever.

How to Play It

All in all, the foundations for a carbon “Super Spike” are here.

So carbon allowances could be headed toward their own “Super Spike,” just like other commodities.

One of the easiest ways to profit from carbon allowances is by purchasing shares in the KraneShares Global Carbon Strategy ETF (KRBN). It tracks a basket of carbon allowances and gives investors a way to get exposure to the carbon “Super Spike.”

Besides carbon, you might want to position yourself for the broader Super Spike in the commodities market.

It’s when hard assets surge, one after another…

Because the profit potential is so massive, Casey Research expert Dave Forest is holding a special broadcast about it tomorrow at 8 p.m. ET. He’s calling it The Super Spike Summit.

During the live event, Dave will reveal his research about past Super Spikes, the gains they’ve made investors, and why the current Super Spike could be three times larger than anything we’ve seen before.

The best part is… it’s free to attend. So reserve your spot here. You don’t want to miss out on this once-in-a-lifetime opportunity.

Good investing,

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Andrey Dashkov
Analyst, Casey Research