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The Dunedin City Council voted to pass on the costs - which total $354,600 - to landfill users whose waste was contributing to carbon emissions.
The increased cost of carbon resulted in the shortfall in the council's draft budget.
When the budget was drafted the projected cost of a carbon unit price was $7, which the council believed was a conservative estimate. However, a recent change in Government policy has seen prices rise as high as $13.50 a unit.
The council considered a "user-pays'' system passing on the cost to those dumping carbon-emitting waste or a 6% increase to all user charges.
The user-pays option passed with a majority in favour. However, there were vocal opponents, including Crs Hilary Calvert and Andrew Noone.
Cr Noone said he supported a user-pays system, but sympathised with booth staff who would have to implement it.
"I try to put myself into the shoes of the operator,'' he said. "We should try and keep it simple.''
Cr Calvert said landfill charges contributed more than $1million to the council's budget and the proposal could not be considered user-pays.
She felt "very uncomfortable'' with the proposal.
"We are making money from people who put their waste in the landfill,'' she said.
"We should be very clear that this is not a user-pays facility, this is our way of making money from it.
"It's a bit like the government putting up the tobacco fee and knowing full well it uses the tax made from that and couldn't do without it.''
Dunedin Mayor Dave Cull said the proposal mimicked the way the council paid for landfill waste under the Emissions Trading Scheme.
"This is user-pays,'' he said.
"It's the ratepayer who makes the money on this - not us. It's going towards offsetting rates.
"We are charged in exactly the same way as we are intending to charge. I can't think of a more equitable way of doing things.''
The user-pays system resulted in an $8 increase to a large trailer-load of waste, rising to $64 from $56, but would not result in an increase for clay cover. A large trailer-load of vegetation would cost $44, up from $39 at present.
Some councillors queried whether the increased charges would result in an increase in illegal dumping.
Council solid waste manager Catherine Irvine said historically increased charges had led to a "peak'' in illegal dumping, which then tapered off over time.
The council also had a good track record in catching illegal dumpers and collected evidence against those doing so, she said.
The council approved the $354,600 increase to the landfill budget, the revised fees schedule, noted that staff were assessing options for reducing the Emissions Trading Scheme liability, requested a report on those options and agreed to communicate with the community before the charges changed.