Speaking before Parliament Wednesday, Osborne said development of shale gas resources in Britain is one of the chief energy aims of the coalition government's budget, despite opposition from critics who says the hydraulic fracturing procedure used to produce it is unsafe.
The government aims to "make (shale gas) happen," Osborne told lawmakers.
"I ... want Britain to tap into new sources of low cost energy like shale gas," the chancellor said. "So I am introducing a generous new tax regime, including a shale gas field allowance, to promote early investment.
"And by the summer, new planning guidance will be available alongside specific proposals to allow local communities to benefit. Shale gas is part of the future. And we will make it happen."
Osborne's promise to cut host areas in on the economic benefits of shale gas development is being seen as a key to counter persistent grassroots opposition to widespread exploration from environmentalists and local activists.
The budget speech came in conjunction with an announcement of the establishment of a new Office of Unconventional Gas and Oil within the Department of Energy and Climate Change, whose charge is to "look at community benefits for shale gas projects."
British Energy Minister John Hayes said the new office would develop proposals by summer "to ensure people benefit from shale gas production if there are future developments in their area."
"Shale gas is an exciting opportunity and has the potential to create jobs and support U.K. energy security," he said. "Local communities must be able to benefit from any shale gas development in their area and the new office will look into how this can be properly achieved."
But Osborne also announced the government would "keep under review" whether the largest shale gas projects should have the option to bypass local planning procedures and apply for approvals directly to the central government.
The proposed tax breaks for shale gas development brought protests from British environmental groups.
"The chancellor is slashing public services with one hand while gifting tax breaks to the fossil fuel industry with the other," Greenpeace energy campaigner, Lawrence Carter said in a statement to The Guardian.
"This is unfair on struggling households, especially when everyone from the energy regulator Ofgem to BP to the energy secretary say U.K. fracking won't bring down bills."
Other low-carbon energy efforts were praised by Osborne in his budget address, citing this week's granting of planning permission for a new nuclear plant at Hinkley Point in Somerset and the announcement to take two carbon capture and storage projects to the next stage of development.
The decision to proceed with the nuclear power plant was made Tuesday after long negotiations between the government and the French energy giant EDF, following a missed December deadline. Still to be decided is a "strike price" to be paid for power generated at the plant, The Telegraph reported.
Meanwhile, Westminster this week selected the Peterhead project in Aberdeenshire, Scotland, and the White Rose project in Yorkshire, England, as the two preferred bidders in its carbon capture and storage commercialization program competition.