David Cameron has said he is in favour of "cash payments to householders" directly affected by fracking.
The prime minister told MPs he was sympathetic to compensation for residents to "make up for any inconvenience" when wells were dug.
The shale gas industry is consulting on how best to support local communities in areas where drilling occurs.
Mr Cameron says fracking, criticised by environmental campaigners, offers big opportunities for the UK.
After visiting two shale drilling sites on Monday, the prime minister said English local authorities would receive all the business rates collected from shale gas schemes - rather than the usual 50%.
The industry has already pledged to give communities that host shale gas sites £100,000 per site in "community benefits", and up to 1% of all revenues from production.
What is still being debated is the mechanism for such compensation - whether it should be through branches of local government, and if so which ones, or by direct payments to householders.
Facing questions from the liaison committee of senior MPs on energy policy, Mr Cameron said direct cash compensation could well be justified "because of the disturbance of a well being dug" in the early stages.
He said he was "quite in favour" of saying to people "there is going to be this small well drilling for shale gas and in order to make up for any inconvenience here is some cash payment".
He told MPs it would be a "great mistake" for the UK not to exploit the potential of shale gas within a properly regulated framework and said people opposed to it simply because it was a "carbon-based" energy source were misguided.
The Green Party has accused Mr Cameron of "flinging bribes" at developers, councils and residents in an effort to overcome widespread public resistance to fracking and the practical obstacles involved.
Mr Cameron also used the session to attempt to clarify recent remarks he made about climate change.
At Prime Minister's Questions last week, Mr Cameron said he "suspected" that the recent storms to batter the UK and the extreme weather in North America were connected to global temperature changes - an argument challenged by some Conservative MPs and peers.
Green campaigners, who have previously accused the government of reneging on environmental pledges, seized on the remarks.
Questioned about the comments by Tory MP Tim Yeo, the prime minister said he was surprised by the fuss they had generated and it reminded him that he had to tread with "great caution" when talking about the issue.
"It is always difficult saying these things in the heat and dust of Prime Minister's Questions," Mr Cameron said.
"What I was trying to say is that it seems to me there are more extreme weather events happening around the world.
"The scientists seem to be advising us that there may well be a link between more extreme weather and climate change."
He added: "You can't point to one weather event and say that is climate change.
"The point I was really trying to make is, whatever you think, even if you think that is mumbo-jumbo, because these things are happening more often, it makes sense to do all you can to mitigate, to prevent and invest to make peoples' lives better and prevent these floods affecting so many people and that is exactly what we are doing."
While he supported the government's de-carbonisation strategy, he said setting a specific target for 2030 now - as the Lib Dems want - would be "unwise" given doubts about the capacity of carbon capture and storage technology.