Evaluating the Economic Sustainability of an Agroecological Transition: A Case Study of Irrigated Olive Systems in Tunisia

Abstract

Agroecology presents a promising pathway for reconciling agricultural productivity with environmental sustainability. However, its adoption is often hampered by a lack of quantitative data on financial viability, particularly in strategic sectors like Mediterranean olive oil production. This study provides a comprehensive financial evaluation of the agroecological transition for the irrigated olive groves in the Elles community (Kef Governorate), a semi-arid region of Tunisia. We employed a cost-benefit analysis, using Net Present Value (NPV) and Internal Rate of Return (IRR) indicators, to assess two distinct investment scenarios: (i) the conversion of an existing irrigated olive grove to an agroecological system, and (ii) the establishment of a new agroecological irrigated olive grove. The results indicate that both scenarios are financially profitable. The conversion project yields an IRR of 22%, an NPV of 6,680 TND (at a 10% discount rate), and a payback period of seven years. The creation of a new grove shows even greater long-term potential, with an IRR of 24% and an NPV of 29,266 TND, albeit with a longer payback period of nine years. The creation of a new grove shows even greater long-term potential, with an IRR of 24% and an NPV of 29,266 TND, albeit with a longer payback period of nine years. A sensitivity analysis reveals that profitability is highly dependent on olive prices and financing conditions, underscoring the economic vulnerability of producers to market fluctuations. These findings confirm that agroecology applied to irrigated olive growing offers tangible economic benefits and contributes to environmental sustainability. However, to de-risk this transition and encourage widespread adoption, targeted institutional support—including grants, subsidized credit, and market access assistance—is crucial. This research provides critical evidence for policymakers and farmers, highlighting a viable model for sustainable agricultural development in Mediterranean agroecosystems.