Between 2010 and 2016, the U.S. coal industry was subject to some of the most extremes booms and busts. Expecting a super cycle driven by growth in emerging markets, big players entered risky acquisitions to increase their market shares — in many occasions with disastrous outcomes.

Three of the four largest U.S. coal producers are now bankrupt, including Alpha Natural Resources and Peabody Energy. The former acquired Massey Energy in 2010, increasing its net debt level to $2.4 billion by 2011. The latter acquired Macarthur Coal and entered bankruptcy with liabilities of $10.1 billion.

According to the latest report by the Carbon Tracker Initiative, these risky maneuvers and failures could have been avoided if companies would have considered the impacts of climate change policies in their business strategies.

Analyzing SEC filings of U.S. coal companies from 2010 through 2015, the Initiative found that while most companies state the impact of climate change policies as risk, they only (and wrongly) account for that risk by referring to the U.S. Energy and Information Agency's reference scenario.

In this way, the reference scenario which is published annually by the EIA is used as a gold standard. In reality, however, this reference case only applies a scenario of business-as-usual and incorporates existing laws and policies, but not policies that are intended to be implemented in the near future.

The report by Carbon Tracker also showed reference scenarios that included possible climate policies were closer to the actual demand and price developments in the coal sector, although those policies were not necessarily implemented in reality. This is a good indicator that market developments take into account possible climate policy scenarios and investors take climate change policies that have not been implemented yet seriously.

The first graph below (p. 7 of the report by the Carbon Tracker Initiative), shows the EIA reference cases published in the Annual Reports of 2006, 2010 and 2015 against the actual price developments and alternative price scenarios which include the Clean Power Plan (CPP) to be implemented in 2016. It can be clearly seen that the price scenario which included the climate change policy of the CPP (although not yet implemented) reflects real price developments much better than the overly optimistic reference cases.

The second graph below, (p. 32 of the report by the Carbon Tracker Initiative), shows the Dow Jones for the U.S. coal market against the gas price and a timeline highlighting the implementation of climate change policies since 2010. This shows clearly that recent coal market price developments might be partly explained by fall in gas prices (due to increased supply and the shale gas boom) and expectations about the impacts of climate change policies on the coal sector.

What does this mean for businesses in the oil, gas and coal sectors? Firstly, it means that businesses should take impacts of climate change policies serious and hedge against those impacts by adopting their businesses to possible future market conditions (i.e., moving part of their business into the renewables sector; not investing in the expansion of existing or construction of new fossil fuel-related energy sources).

Secondly, it means the currently low oil, gas and coal prices could be regarded as an opportunity rather than a stress test for existing businesses in the coal, oil or gas sector to change their business strategy toward a low-carbon future.

In both cases, that would mean businesses should already now incorporate the impacts of carbon-reducing climate policies into internal company projections.

In any case, business should avoid using only one price scenario that doesn't include the possible impacts of future climate change policies. And, as the Carbon Tracker Initiative suggests, businesses should be clear and transparent in their publications about how reference cases are developed.

For instance, the EIA's reference case, uses the National Energy Modelling System, which takes a market-based approach on existing regulations and standards.