Friends of the Earth spokesperson Jane Thomas says allowing councils to keep 100% of the business rates related to fracking could lead to conflicts of interests when planning applications are being considered.
She said: "This latest Government move highlights the depth of local opposition to fracking and the desperate lengths ministers are prepared to go to overcome it.
"People are right to be concerned about the impact of shale gas extraction on their communities - especially as experts say it won't lead to cheaper fuel bills.
"This move raises potentially serious concerns about conflicts of interest, if councils that benefit from this money are also the ones who decide on planning applications from fracking firms in the first place."
She added: "The Government should be encouraging the development of Britain's huge renewable power potential, instead of coming up with new incentives that keep the nation hooked on climate-changing fossil fuels."
More top news
James McClellan, 53, is suing the firm claiming he was branded an 'old buffer' and forced out of his account manager job.
A family's desperate bid to stop a teacher joining Islamic State has been revealed in emotional recordings.
Wednesday unsavoury incident involving Jonny Evans and Papiss Cisse is the latest in a long line of gob-related football controversy