Councils that give the green-light to 'fracking' projects will be allowed to keep millions of pounds more in tax revenue, David Cameron has announced.
The Prime Minister said local authorities in England would receive 100% of the business rates collected from shale gas schemes - rather than the usual 50%.
The move is part of an "all out" drive to exploit the controversial pressure mining technique. The Government believes it could generate billions of pounds for the economy, support 74,000 jobs, and lower energy costs.
Total is due to confirm this morning that it is investing in fracking exploration in the UK, by taking a share in a licence in the Midlands currently operated by a US firm.
Whitehall officials said the business rates commitment would mean councils hanging on to up to £1.7 million extra a year from each fracking site.
They stressed that the mining industry had already pledged to give local communities £100,000 for each test drilling - and a further 1% of the revenues if shale gas is discovered.
Mr Cameron said: "A key part of our long-term economic plan to secure Britain's future is to back businesses with better infrastructure.
Writing in the Sun on Sunday, business minister Michael Fallon said Britain had to "embrace the extraordinary opportunities offered by shale gas" for the sake of generations to come.
"In the Seventies, North Sea oil helped salvage our economy from crippling stagnation," he wrote.
"We have a similar chance to create tens of thousands of jobs and energy security.
"A mile and more beneath us lies deposits of gas-bearing shale rock with the potential to guarantee energy supplies in an increasingly uncertain and competitive world.
"If our boldness is matched by others in Europe, it could also drive down the cost of power for hard-working families and businesses."
But environmentalists accused ministers of trying to "bribe" local authorities. Lawrence Carter of Greenpeace said: "This is a naked attempt by the government to bribe hard pressed councils into accepting fracking in their area.
"Cameron is effectively telling councils to ignore the risks and threat of large-scale industrialisation in exchange for cold hard cash.
"But the proposal reveals just how worried the government is about planning applications being turned down.
"Having had their claims that fracking will bring down energy bills and create jobs thoroughly discredited, the government is now resorting to straight up bribery to sell their deeply unpopular fracking policy."
A Local Government Association (LGA) spokesman said: "Councils have been clear that the people and communities whose areas host fracking sites must feel the benefit.
"Today's announcement from the Prime Minister is a step in the right direction, which will mean that business rates paid by shale gas firms will help councils to maintain and improve local services for residents."
He went on: "While it is encouraging that government is listening, local areas will be keen to hear more details on how the community benefits package will be strengthened to fairly renumerate those who will be most affected.
"Given the significant tax breaks being proposed to drive forward the development of shale gas and the impact drilling will have on local communities, these areas should not be short-changed by fracking schemes. One per cent of gross revenues distributed locally is not good enough; returns should be more in line with payments across the rest of the world and be set at 10 per cent.
"The community benefits of fracking should be enshrined in law, so companies cannot withdraw them to the detriment of local people.
"The LGA is encouraging the development of models which will ensure cash is used to support local priorities and which will treat money from fracking separately from ordinary tax revenue."
Shadow energy minister Tom Greatrex said: "Gas will remain an important part of our energy mix in the future, and if shale gas can replace our rapidly depleting North Sea reserves it could help improve our energy security.
"It is right that any communities that host nationally significant energy infrastructure are able to share in its rewards.
"But the Government must get its priorities right. Only by fully addressing legitimate environmental and safety concerns about fracking with robust regulation and comprehensive monitoring, will people have confidence that the exploration and possible extraction of shale gas is a safe and reliable source that can contribute to the UK's energy mix."
Friends of the Earth senior campaigner Jane Thomas said: "It's ironic that a French-owned company is seeking to drill the UK for shale gas when it's banned from fracking in France due to environmental concerns.
"Fracking is not the solution to our energy problems - experts say it won't lead to cheaper energy bills and the Government admits shale gas and coal bed methane development could have significant impacts on local people and the environment.
"The best way to build an energy system that doesn't cost the earth is to invest in a comprehensive energy efficiency programme and develop the UK's huge renewable power potential."
Energy Minister Michael Fallon insisted that the incentive on offer was the same as for other renewable technologies such as wind farms and solar energy.
"It is only right, when there is local growth and local jobs, that the councils are able to retain more of the business rates in order to help improve or maintain local services," he told BBC Breakfast.
"I think that is only fair that local people should see some of the direct benefit."
He went on: "I hope councils will look at the exploration of shale in a responsible way.
"We now know that we are sitting on hundreds of millions of cubic feet of shale gas.
"We do not yet know whether we can get it out as effectively as they have got it out in the US. We do not yet know whether it could be a really good reliable source of cheap energy. That is why we do need to explore.
"We expect 20 to 40 wells to be drilled over the next couple of years. We want local people to benefit from that in terms of the jobs and in terms of the extra growth that it will bring."