2013, Helm 2015, Meinshausen et al. 2009, Allen et al., 2009; McGlade and Ekins, 2015; van der Ploeg, 2018). The distributional estimates of whose reserves are “unburnable” are usually based on the calculations using global extraction cost curves and break-even prices. For example McGlade and Ekins 2015 used a large ensemble of models to estimate that about a third of global oil reserves, half of global gas reserves and over four-fifths of global coal reserves are “unburnable” for a 66 percent probability of achieving the 2°C goal, mostly in China, Russia and the United States in the Arctic, and Canadian tar sands. The Carbon Tracker (2017) used a bottomup extractive industries model to estimate that one-third of the potential supply from new oil projects in the pipeline of major listed and state-owned oil companies is “unneeded” and 25% of potential supply from new gas projects is “unneeded” in a 2°C scenario. This implies that twothirds of new oil, and three-quarters of new gas development projects were considered compatible with the 2°C constraint. Ansari and Holz (2020) use a partial equilibrium model of the global energy system to argue that China has less carbon assets at risk than Latin America and much less than the Middle East, and hence is more likely to engage in a green transformation.

The stranded asset studies using more complex macroeconomic models are scarce. Mercure et al. (2018), with a suite of models based on the macroeconomic model E3ME, estimated a discounted global wealth loss of $1 trillion to $4 trillion in stranded fossil-fuel assets as a result of (1) ongoing technological progress; (2) amplified by new climate policies to reach the 2°C target; and/or (3) ‘sell-out’ strategies of low-cost producers (some OPEC countries) to maintain their level of production despite declining demand. The authors found a small impact on aggregate global GDP but significant differences between the winners (e.g. net importers such as China or the European Union) and the losers such as Russia, the United States or Canada, which could see their fossilfuel industries nearly shut down. Van der Ploeg and Rezai (2016) applied a macroeconomic model to calculate the value of stranded assets that varies with different policy scenarios. Wei Jin and ZhongXiang Zhang (2018) showed that under some conditions, environmental regulations, through directing investment towards clean capital, do not have to lead to stranding of fossil fuel assets or the Green Paradox.

This study goes beyond the narrow focus of the literature on individual assets at risk, whether oil, gas or oil or thermal power plants. We explore how alternative scenarios of low-carbon transition can trigger structural transformation and diversification of national wealth and related drivers of – growth and welfare in the fossil fuel dependent nations. We also quantify impacts of alternative coping diversification and climate cooperation strategies that these countries can pursue to overcome the resource curse and navigate towards sustainable long-term growth in a decarbonizing world. Our approach aligns more with authors like Zenghelis, Fouquet, and Hippe (2018) and Lange et al (2018), who see stranded assets as an opportunity to refresh and rebalance the wealth of nations.

# **2. Methodology**

This section summarizes the methodological approach chosen for this study. A more technical description can be found in GTAP (2018).

## **2.1. The Models**

This study explores multiple scenarios of the plausible impacts of external policy events on the FFDCs and their domestic policy choices to cope with these impacts. Exploratory scenarios are simulated with the GTAP-based global, dynamic, recursive computable general equilibrium 4