Examining Opportunities and Challenges for Implementing Land-based Financing Instruments for Funding Climate Action

Lagos, a coastal megacity, is facing a daunting challenge: how to adapt to the rapidly escalating impacts of climate change while grappling with the complexities of rapid urbanization and land management. As the city’s population continues to surge and its built-up area expands at an alarming rate, the risks posed by flooding, sea level rise, and other climate-induced hazards are becoming increasingly dire. The study explains how, at the heart of this crisis, lie the dysfunctionalities in Lagos’s land markets. Inadequate risk assessments, information asymmetries, speculative behavior, and weak enforcement of land use regulations are leading to the underpricing of climate risks and the overvaluation of properties in high-risk areas. The result is a deeply unequal landscape of resilience, where marginalized communities bear the brunt of environmental hazards. This study delves into the intricacies of these challenges, offering a comprehensive analysis of the factors that contribute to the underpricing of climate risks in Lagos’s land markets. But it doesn’t stop there. The challenges faced by Lagos are immense, but so too are the opportunities for transformation. The study also presents a bold vision for a more resilient, sustainable, and equitable future, outlining a set of recommendations that span land management, and developing a comprehensive land use plan that integrates climate risk assessment, to taxation reforms, and also explores the potential of land-based financing instruments, such as development charges, betterment levies, and transfer of development rights, to generate funds for adaptation projects. By promoting resilience as a marketable amenity, Lagos can attract private sector investment in resilience infrastructure and create a more robust and competitive market for climate-resilient properties.

This paper is part of a series of working papers on land-based financing instruments for funding climate action.