Mayors want bigger tax hike to manage climate change

A parliamentary inquiry will on Friday hand down its report into Labor's proposed changes to the petroleum resource rent tax.

The group includes mayors from regional areas of the country that have been battered by flooding and bushfires, such as the Northern Rivers and East Gippsland.

The letter calls for changes to the tax to collect an extra $10 billion each year for local governments to pay for the impacts of climate change.

It says local governments are the least resourced to cope with the increasing costs of climate change, including maintaining infrastructure and services after disasters.

The federal government says gas will remain important to Australia to 2050 and beyond. (Dean Lewins/AAP PHOTOS)

"These companies make windfall profits, while many pay no petroleum resource rent tax, receive the gas they export for free, pay little or no company tax, and benefit from taxpayer subsidies," the letter reads.

"Increasing the PRRT collected from fossil fuel companies making windfall profits offers an opportunity to redress this balance."

The government released its future gas strategy on Thursday, saying gas would remain important to Australia to 2050 and beyond.

It's rankled Labor MPs who say the government should be transitioning away from fossil fuels and angered climate groups.

Greg Jericho, chief economist at the Australia Institute, said the petroleum resource rent tax had the potential to be a major revenue source for the government.

"Current arrangements mean it collects less revenue than tobacco or beer excises, or even than is paid in HECS repayments," he said.

"The PRRT - and the government's amendments - do not go far enough to ensure that the gas industry pays a fair share of tax."

Labor wants to secure support from the coalition for its proposed changes to raise an additional $2.4 billion across four years.