hedge against the Nordhaus border taxes. The drop of GDP and consumption as a result of external trade sanctions is similar no matter what diversification path they were on (figure 5). Gradually, however, these strategies combined ensure the fastest increase in the rate of growth of GDP and consumption compared with alternatives. By 2050, the combination of asset diversification and cooperation results in households’ consumption and GDP being around 9 and 5 percent higher respectively than under free-riding and traditional diversification scenarios. Asset diversification reduces GHG emissions slightly below traditional diversification for any cooperative policy choices, but only together with domestic cooperative carbon taxes, asset diversification also reduces emissions against BAU (figure 3).

Asset diversification is also a robust economic strategy. “Robust” means that in the long run, asset diversification outperforms traditional diversification by all macro-economic indicators and under all external policies that have been simulated here. With or without cooperation, it robustly offers higher long-term consumption and GDP for the FFDCs as the world moves more rapidly toward decarbonization. It performs better than alternative economic strategies by two decision criteria. By the _minimax (least-regret)_ criterion, asset diversification minimizes the possible losses of consumption in the worst-case scenario, although it does not prevent consumption from being lower than in BAU. Asset diversification also maximizes possible consumption gains in the bestcase scenario, in which FFDCs implement cooperative domestic climate policies through wellhead taxes, meeting the _maximax (highest gain)_ criterion. The only no-regret long-term strategy for FFDC consumers is cooperative climate action with internationally agreed-upon wellhead taxes.

_Figure 10: Long-Term Consumption in Fossil Fuel–Dependent Countries (% difference from BAU)_ <!-- Start of picture text --> 3.00<br>2.00<br>1.00<br>0.00<br>-1.00<br>-2.00<br>-3.00<br>-4.00<br>-5.00<br>-6.00<br>Traditional diversification Asset diversification<br>Unilateral policies border tax on carbon content Unilateral policies Nordhaus tax<br>Cooperative carbon emissions taxes Cooperative carbon wellhead taxes<br>BAU<br>Discountedhouseholds' consumption as % of<br><!-- End of picture text --> _Source:_ World Bank and Purdue University (ENVISAGE).

_Note:_ BAU = business as usual; FFDCs = fossil fuel–dependent countries. The colored bars denote the cumulative difference between discounted real adjusted consumption under different scenarios and the corresponding figures under the BAU scenario (at a 6 percent discount rate) in FFDCs (over the 2021–50 period), expressed as a percentage of BAU Asset diversification is also robustly better for long-term GDP in FFDCs. Under any configuration of external events, it yields higher discounted GDP than any alternative diversification strategy (figure 11). It also meets the _minimax (least-regret)_ criterion, by minimizing possible GDP losses for FFDCs in the worst-case scenario (unilateral climate policies with Nordhaus taxes imposed by LCT pioneers on imports from FFDCs). In fact, it is the only economic strategy that results in long-term GDP gains relative to BAU regardless of the external policy events considered here. Asset diversification should therefore be particularly appealing to loss-averse decision makers if they are also very patient. Asset diversification also maximizes the possible gains in the best-case 19