Climate Action would help boost Tunisia’s economic recovery: World Bank Report

Tunisia faces a major water scarcity issue, which compromises agricultural production as low and variable rainfall exposes the deficiencies of a sector that needs reforms to adapt to climate change.

Water scarcity, coastal erosion and more frequent flooding are among Tunisia’s most pressing climate challenges, says a new World Bank Group report, which suggests a series of urgent adaptation and decarbonization actions that would help boost Tunisia’s economic recovery and create jobs.

The World Bank Group’s Tunisia Country Climate and Development Report (CCDR), released ahead of COP28, identifies policy actions and investment opportunities that could reduce the impacts of climate change on people and businesses and enhance Tunisia’s economic competitiveness.

The report says combined adaptation and mitigation measures to address climate change and decarbonize the electricity sector could boost GDP growth to 8.8 percent by 2030, reduce poverty and slash energy-related emissions. On the flip side, failure to act could result in GDP losses of up 3.4% by 2030, leading to projected annual losses of around 5.6 billion dinars ($1.8 billion).

"The Tunisia CCDR, aligned with the National Strategy for Ecological Transition and the 2023-2025 Development Plan, underscores the enduring support of the World Bank—a steadfast partner in Tunisia's path towards a more sustainable future,” said Jesko Hentschel, World Bank Director for the Maghreb. “Adapting to a changing climate and promoting a green economy represents a unique opportunity for Tunisia’s growth, resilience, and sustainable development,” he added. 

Tunisia faces a major water scarcity issue, which compromises agricultural production as low and variable rainfall exposes the deficiencies of a sector that needs reforms to adapt to climate change. In addition, water losses at the National Water Distribution Company rose from 25% in 2010 to 34% in 2021. 

The report also emphasizes that sea level rise could impact nearly a quarter of Tunisia's coastal zone by 2050, with potential total loss of land worth US$1.6 billion. The likelihood of catastrophic flooding is projected to increase almost ten-fold and the costs for rehabilitating road assets alone from this flooding could reach $277 million by 2050. These risks not only imperil the livelihoods of people who live on the coast and in flood-prone areas but also jeopardizes the country's international standing as a sought-after travel destination.

The report calls for strategic actions to address water scarcity, including rationalizing water demand, strengthening water networks to reduce water losses and waste, and protecting ecosystems, especially watersheds, oasis ecosystems, forests, and wetlands to increase water availability and resilience to climate shocks.

Decarbonizing Tunisia's energy sector, by enhancing energy efficiency and transitioning to green fuels in end-use sectors and electricity generation, also presents important opportunities. Energy accounted for 53% of the country's trade deficit and 58% of its greenhouse gas emissions in 2022, which highlights the complex links between energy and the macro-fiscal framework. The report said decarbonizing the energy sector would generate significant economic gains by helping Tunisia to address its external imbalance and reducing energy costs, hence enhancing affordability for households and competitiveness for businesses, while reducing emissions. 

“This Tunisia CCDR demonstrates the importance of public and private sector collaboration when addressing serious challenges like climate change,” said Cheick-Oumar Sylla, IFC’s Regional Director for North Africa and the Horn of Africa. “Building on our partnership with Tunisia in the renewable energy sector, IFC is committed to helping the country adapt to and mitigate the effects of a shifting climate, while achieving sustainable growth.”

Given Tunisia’s current macroeconomic challenges, the report highlights the importance of creating the right macro-financial conditions for investments to achieve these objectives. This requires redirecting recurrent public expenditures towards the most urgent public adaptation investments. It is also essential to facilitate private sector investments in green activities, for instance by eliminating sector-specific authorizations and constraints, streamlining investment approvals, and reducing the regulatory influence of incumbent sector operators.

Extensive consultations with government, private sector, and civil society stakeholders were instrumental in shaping the Tunisia CCDR.