The Church of Scotland has joined environmental groups in saying tax breaks for fracking – shale gas extraction – will cause needless damage to communities and the environment.

The shale gas allowance announced yesterday by Chancellor George Osborne will more than halve the tax due on a proportion of the income from production.

Mr Osborne claimed he wants to create the "most generous" regime for shale gas in the world, but the Reverend Sally Foster-Fulton, convener of the Church of Scotland's Church and Society Council said it was "disappointing", adding there are "many alternatives to fracking".

There are shale deposits in central Scotland but no plans - as yet - for fracking north of the Border.

Ms Foster-Fulton said: "Instead of embracing a new, low-carbon future the Chancellor is signalling a return to the old carbon economy, at the expense not only of those people who will be affected by fracking operations in Britain but those around the world who suffer most from the effects of climate change.

"In a country rich in potential renewable energy and with great opportunities to reduce our energy wastage by better home insulation, there are many alternatives to fracking."

Concern has also been raised about a possible project to mine for methane gas by an Australian firm in two fields at Airth near Falkirk, Stirlingshire. Campaigners are hoping the plans will go to a public inquiry.

The new tax is based on allowances for the extraction of "technically or commercially challenging" oil and gas, and will reduce the tax on the income from shale production from 62% to 30%. Westminster also plans to publish planning guidance on shale gas extraction.

Mr Osborne said shale gas had "huge potential to broaden the UK's energy mix" and added: "We want to create the conditions for industry to explore and unlock that potential in a way that allows communities to share in the benefits.

"This tax regime, which I want to make the most generous for shale in the world, will contribute to that. Shale gas - has the potential to create thousands of jobs."

But Lang Banks, director of WWF Scotland, urged the Scottish Government to rule out fracking.

"The massive tax breaks and bribes being offered by the UK Government to prop up polluting shale gas are a recipe for environmental and financial disaster," he said. "Scottish ministers must use all the powers at their disposal to close the door on shale gas fracking.With renewable energy going from strength to strength in Scotland, there's little need for us to follow the UK Government's headlong rush to trash the environment and our climate.

"UK ministers would be better supporting initiatives that reduced energy demand for every household and deliver renewables projects even more quickly."

A Scottish Government spokesperson said that any proposals would be examined on their merits, adding: "The Scottish Government strongly endorses the appropriate and robust regulation of drilling techniques such as hydraulic fracturing (fracking) associated with the extraction of shale gas."

Shadow energy minister Tom Greatrex said shale could be a useful part of the UK energy mix as North Sea oil becomes scarcer.

But he added: "Announcing tax breaks before we know how much shale gas is actually recoverable, before anyone even has a licence to extract it, and before anyone even knows whether fracking needs tax incentives, makes no sense at all."