Domestic water pollution cost of shale gas exploitation in China: An empirical study with Averting Behavior Theory

Abstract

Shale gas development in China helps to improve the structure of energy supply and reduce energy dependence on foreign countries. However, the environmental risks of shale gas development, especially groundwater pollution, are non-negligible. The external cost of such groundwater pollution can be estimated by quantifying the increased domestic water consumption before and after shale gas extraction. We implemented a Difference-in-Difference estimation in Fuling, Chongqing of China to obtain the monetary cost of domestic water pollution of shale gas development with the survey data of household water consumption. We found that shale gas exploitation increased the expenditure of domestic water consumption by 16.43–17.00 yuan per household per month, aggregated to 203.94 yuan per household for the annual averting cost and accounting for 2.17% of household annual income in poverty-stricken areas in 2017. The paper contributes to the literature by estimating residents’ preference for shale gas development in China with Averting Behavior Theory, thus enriching the literature on evaluating the environmental cost of shale gas exploitation in a region where per capita income and environmental awareness is relatively low. Our estimated results have great policy implications for ecological compensating for the residents adversely affected by shale gas wells and also have profound implications for environmental regulation and protection in China.