Fees for mixed waste going to the Dunmore waste landfill site have been cut by 8.2 per cent, with the price per tonne dropping by $28 to $313 per tonne.

"Council responded to the government's announcement as soon as advice was officially received," Mayor Marianne Saliba said.

A report to Shellharbour City Council on Tuesday night said that in the 2012-13 financial year, the council collected $947,000 in carbon tax and a further $875,000 was budgeted for collection in the 2013-14 financial year.

The council's corporate policy director, Lee Furness, said any money collected from the carbon tax that was surplus to the council's liability would be restricted and used to help fund the proposed $14 million redevelopment of the Dunmore Waste and Resource Recovery Centre.

Shellharbour City Council spent $1.14 million on a gas extraction system at the Dunmore depot to help reduce its carbon tax liability, which started operating in August 2013.

The system captures the landfill gas, mostly the highly pollutant methane, through wells sunk into the landfill. The gas is captured and then burnt in a nine-metre-high stack.

The system was part of long-term plans although the carbon tax "forced its hand". A council spokeswoman said Shellharbour Council had a responsibility to reduce its greenhouse gas emissions but there were other benefits from the system.