Fear of Fracking? The Impact of the Shale Gas Exploration on House Prices in Britain
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.
We thank Lin Fan for excellent research assistance and seminar participants at the University of Amsterdam, the University of Bristol, and the annual SERC meeting for useful comments. This work was part-funded by the Economic and Social Research Council (ESRC) through the Applied Quantitative Methods Network: Phase II, grant number ES/K006460/1 and the Centre for Economic Performance, grant number ES/M010341/1. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.