Highlights:

Tunisia’s economic challenges have been compounded by an increasing vulnerability to climate change. The country’s location makes it one of the most exposed to climate change in the Mediterranean region, with temperature increases expected to be accompanied by reduced and more variable precipitation; a rising sea level with saltwater intrusion; an increase in forest fires; and escalating extreme weather in the form of floods and droughts. These climate-linked effects will deplete natural resources, exacerbate water scarcity, and drive losses of agriculture and coastal infrastructure. Some of these effects are already taking a toll. Four years of drought conditions culminated in a significant drop in Tunisia’s agricultural production in 2022/23. Vulnerability to increasingly frequent and severe extreme weather events (especially flooding) and sea-level rise will also increase, as will the costs of coping with these risks. Some of these issues will drive energy demand (for example, for desalination, pumping, and cooling), resulting in higher emissions and air pollution while increasing dependency on imports.

This Climate Change and Development Report (CCDR) establishes the case for a new economic model to address Tunisia’s challenging economic and social context and vulnerability to climate change. The proposed model would involve major changes, such as using pricing to rationalize the consumption of resources and creating economic conditions that support private investments in climate adaptation and decarbonization. It would also involve a shift from recurrent public expenditures to public investments in adaptation and decarbonization

Increased resilience and efficiency of the agricultural sector including through nature-based solutions As the main consumer of water, the agriculture sector has an important role to play in improving irrigation efficiency to reduce water demand. The implementation of nature-based solutions can further increase water availability. To protect rural areas from climate-induced income stress, smallholder farmers (including herders) would benefit from upgrading their operations with climate-smart practices to increase productivity and promote more resilient, rainfed agriculture. Nature-based solutions—especially those that support the recharge of groundwater reservoirs by conserving and restoring forests, watersheds, wetlands, and oases landscapes—will play a crucial role in mitigating the anticipated decline in surface water.

Agriculture is the largest water user in the country, accounting for more than 75 percent of total water usage when agricultural use is not restricted. The low cost of irrigated water has led to its  overexploitation. The agricultural sector is important for the national economy, contributing 9.6 percent of GDP in 2022 and employing 14 percent of the active population in 2019. It also contributes to food security. Although 90 percent of arable land is rainfed, irrigated agriculture consumes the largest share of water and contributes to 36 percent of the value added by agriculture. To improve surface water mobilization, between 35 and 56 percent of total agricultural sector investments since 1990 were related to water. However, the economic return of surface water mobilized for irrigated agricultural activity covers only 40 percent of the cost invested per cubic meter. Subsidies have partly prevented progress in reducing water demand from irrigated agriculture. For instance, the price of irrigation water for public schemes (representing 56 percent of all irrigable area) from large dams has remained unchanged since 2004, at 0.065 TD/m³, representing only 15 percent of the cost in 2018.

The crucial role of ecosystems in supplying water has long been neglected, with freshwater allocated entirely to the needs of drinking water and irrigation. For instance, the Ichkeul ecosystem has been deprived of freshwater, with levels below minimum ecological standards, by the construction of six dams on the main wadis (ravines) that supply it. Moreover, intensive agriculture and the misuse of fertilizers have resulted in a decrease in groundwater quality, with the concentration of nitrates increasing. Land degradation causes an estimated economic impact of between 2 and 7 percent of national GDP per year.

Social protection enhanced and insurance schemes developed Improving the financial resilience of households, farmers, and businesses can protect the population’s well-being in the face of climate risks. Disaster risk financing and insurance can address residual risk after disaster risk reduction efforts have reduced the impacts of disasters. Updating the social registry of the country’s main social assistance program, AMEN, to include all vulnerable households would help with the issue of early warnings and would support a speedy response to potential future climate shocks.