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Paper No' SERCDP0207: | Full paper
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Keywords: shale gas, fracturing, property valuation, housing prices, consumer expectation, hedonic price, United Kingdom
JEL Classification: Q5; Q42; Q51
Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: SERC Discussion Papers
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Abstract:Shale gas has grown to become a major new source of energy in countries around the globe. While its importance for energy supply is well recognized, there has also been public concern over potential risks – such as damage to buildings and contamination of water supplies – caused by geological disturbance from the hydraulic fracturing (‘fracking’) extraction process. Although commercial development has not yet taken place in the UK, licenses for drilling were issued in 2008 implying potential future development. This paper examines whether public fears about fracking are evident in changes in house prices in areas that have been licensed for shale gas exploration. Our estimates suggest differentiated effects. Licensing did not affect house prices but fracking the first well in 2011, which caused two minor earthquakes, did. We find a 2.7-4.1 percent house price decrease in the area where the earthquakes occurred. Robustness checks confirm our findings.
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