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Caerphilly County Borough Council is one of four local authorities in Wales to have failed to meet new recycling targets.
The council’s recycling rate dropped from the sixth best in Wales, at 65.08%, to the third worst at 62.5%.
New targets set by Welsh Government require councils to achieve a recycling target of 64%.
This year, the target was increased from 58%, and will increase again to 70% by 2025.
Councils that fail to reach the target could face fines of £200 per tonne of excess waste.
Councillor Nigel George, cabinet member for community services, said: “Earlier this year we were made aware of concerns raised by NRW about the way a third-party waste company disposed of textile materials. This waste could not be counted and subsequently led to a decline in our overall recycling performance of around 2%.
“This is obviously very disappointing because, if this material had been processed properly as we were led to believe, then we would have achieved our statuary target.
“The council is taking appropriate legal advice to address this matter and we are also working with Welsh Government so that they fully understand the reasons for our shortfall.”
Cllr George thanked residents “for their ongoing efforts” and added: “We are taking all appropriate steps to ensure our waste disposal contracts are robust and monitored effectively to avoid any repeat of this type of incident in the future.”
Independent councillor Kevin Etheridge has written to Welsh Government environment minister Lesley Griffiths and Cllr George to express concerns, and said: “We want details of what measures will be taken.”
However, across Wales, the recycling rate reached a record high, with the country as a whole achieving a recycling rate of 65.14%.
The figures show 1.51 million tonnes of material was generated within local authorities in Wales last year, a decrease of almost 2% on 2018-19.
Nearly a million tonnes of which was recycled, reused or composted.
Welsh Government’s environment minister, Lesley Griffiths, said: “For Wales as a whole to exceed the target in the first year is testament to the considerable effort everyone has put in.
“We could not have achieved a record year for recycling in Wales without the hard work of our local authorities and households across Wales and I’d like to particularly congratulate those authorities who have exceeded the next target five years early.”
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