oil (HFO) and diesel accounted for approximately 23 percent of the energy mix.<sup>13</sup> The scenario that is modeled includes a fully integrated network in the Sahel region with the additional condition to reduce emissions by 80 percent compared to the business as usual baseline (which is existing network and committed transmission lines between countries). The additional energy supply from this scenario is depicted in Figure 8, and only represents a marginal increase from the baseline. Due to the benefits of integration, there is a small reduction in CAPEX compared to the baseline, while an increase in OPEX (up to -0.08 percent and 0.02 percent of baseline GDP for investment and OPEX, respectively, by 2030) is recorded as well. However, it should be noted here that a fully integrated electricity network in the Sahel not only demands large CAPEX outlays, but faces political economy hurdles as well. Estimates suggest that $1B in CAPEX is needed by 2040 for Mauritania only to develop the national transmission network and enhance interconnections with neighboring Sahel countries; see World Bank (2023) for more details.

Taking into account the role of the government as a monopolist in the construction of the power transmission network we are assuming that most of the costs will be financed by the government. In addition, we assume that roughly 20 percent of CAPEX is imported. However, future power generation costs could potentially be covered by the private sector through Independent Power Producer (IPP) schemes, possibly with support from the World Bank. For an overview of IPP schemes and the lessons learned, see Besant-Jones (2006) and Vagliasindi (2012). In particular, gas-to-power and renewable energy (solar photovoltaic and wind) projects are clean energy technologies with the potential of being financed through the private sector with appropriate risk mitigation mechanisms.

Our results, summarized in Figure 9, show that higher OPEX costs and lower investment spending (relative to the baseline) produce a small decrease in consumption and investment. Imports decrease in response to aggregate demand. The lower output gap puts downward pressure on inflation (note the scale – the numbers are relatively small). Electricity valueadded decreases relative to the baseline given that some energy supply will be coming from other countries due to the grid integration. The fall in aggregate demand induces a reduction in industry and agriculture too. At the same time relative price shifts make services better

> 13The energy mix is supposed to reflect the main grid only, i.e. isolated grids and off-grid generators are not included. Including those auxiliary electricity generators would increase the share of HFO and diesel substantially, see IRENA (2023). In addition, hydro power plants that are not located in Mauritania but provide energy to the country as domestic providers are included in the energy mix. Those include the _Barrage de Manantali_ , the _Centrale hydroélectrique de Gouina_ , and the _Félou Hydroelectric Plant_ . The three hydro plants are located in Mali. Note that the energy mix is an entirely exogenous input in the model, and different assumptions about the energy mix can be incorporated into the scenario analysis.

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