'Smart bins' fitted with waste sensors could reward households who recycle with lower council tax, according to a think tank.
The bins would record household recycling rates and allow councils to save money from better-planned rubbish collection routes.
The savings could then be passed on to residents who send the least waste to landfill.
The recommendation comes in a new report from think tank the Social Market Foundation (SMF) which examines how new technologies could provide more efficient delivery of public services.
The SMF says that a rebate would incentivise households to recycle more and waste less – driving up recycling rates across the country.
UK councils such as Rugby and Wandsworth are already using sensor technology that monitors and reports bin fill-levels in litter bins. Some smart bins automatically compress waste, reducing the frequency of collections.
With bins only emptied when full, the SMF says this has resulted in significant financial savings. The SMF says that using similar technology in the home could also deliver significant savings and encourage recycling.
Scott Corfe, chief economist at the SMF, says: “Quite rightly, there is growing concern about the environment and the amount of waste produced by UK households. Local government needs to explore how new technologies – including smart bins – can dramatically drive up recycling rates and reduce waste.
“Critically, we need to ensure that all parts of the UK are doing their bit to reduce the amount of waste going into landfill. At the moment there are huge differences in recycling rates across the country, ranging from close to two thirds in East Riding of Yorkshire to a paltry 14% in the London Borough of Newham.
“To get households on board with the green agenda, it is important that carrots are used, as well as the occasional stick. A council tax rebate for households that do their bit for the environment, by not producing as much as waste, would be a good reward for doing the right thing.”
Some councils have reduced the frequency of domestic waste collections to encourage households to recycle more.
Technology that allows the more efficient use of bins, coupled with financial incentives, could be a more effective tool, the SMF suggests.
The think tank has a number of other ideas that could save money, including smart street lighting which activates when people and vehicles are nearby, reducing light pollution and energy usage.
Parking space vacancy sensors could help guide individuals to available car parking spaces, while road repair drones would identify potholes and repair these by spraying asphalt.