The Green Caffeen program had piqued the interest of several hospitality businesses, but was shot down for its $23,000 price tag to launch.

If Tamworth Regional Council (TRC) had spare money laying around, it should be used to fill potholes, Cr Russell Webb said.

"I think it's a waste of money," he said.

"Yes we don't like to see the single use cups wasted and thrown into landfill but they don't have to be, they can be recycled as it is.

"But if we're keen about not putting those cups into landfill, what a lot of people do now and what I certainly do when I go travelling - you go and buy one of these [a reusable mug], it costs you a few bucks, there's no waste and there's no problem with COVID because it's your cup.

"I think it's a feel-good thing and an absolute waste of money when the council has a tight budget."

The scheme is like a library system for takeaway coffee or tea cups and is free as long as customers bring the cups back.

In Australia 650 cafes participate across almost 30 local government areas.

Green Caffeen claims the scheme has saved more than 822,000 cups from landfill since it started in 2018.

Environmentally-friendly or not, Cr Glenn Inglis said he would vote against it for two reasons; one because a global pandemic didn't seem the appropriate time to share mugs and two, because it could been seen that the council favours some businesses over others.

"To think you'd encourage a program where you hand back cups and the one you get back is one that's been washed by the retailer whilst you're in the middle of a COVID pandemic I find extraordinary," he said.

"Looking at it in a more legislative way, I'm interested in the fact that it wouldn't surprise me that you could get a competitive neutrality complaint, where you use government money to incentivise a consumer to go to one business over another - so far only seven have indicated and $23,000? That's about $3200 sponsorship for each of those individual businesses.

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"If I'm the coffee shop not participating in the scheme next to the one that is participating in the scheme, I'm not sure I'd be too happy about that, because we have used government money to incentivise a consumer to go into a particular business over another."

Had the council supported the $23,000 first-year buy-in, it would have facilitated the seeding of participating cafes with 2,500 branded reusable cups.

It would have helped with venue engagement, a free coffee day activation event with Green Caffeen on-the-ground and a 12 to 24-month report on the program results.

The scheme had the support of councillors Helen Tickle and Juanita Wilson who thought it would help reduce waste.

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