A Whangarei company is set to help combat a nationwide used tyre problem, thanks to a government grant.

Golden Bay Cement is one of a handful of private companies to receive a combined $19 million from the Government to help them invest in technology to dispose of used tyres.

Environment Minister Nick Smith announced on Thursday that Golden Bay Cement will get the biggest share of that - $13.6m towards the $18.1m cost of new equipment to dispose of 3.1 million shredded tyres a year.

Waste Management New Zealand will get $3.8m to set up a tyre collection network and shredding facilities in Auckland and Christchurch.

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"This is needed because the major barrier to re-use of waste tyres is their bulk, making transport and disposal uneconomic," Mr Smith said.

Northland Regional Council chairman Bill Shepherd welcomed the announcement.

He said the grant will allow the cement works to upgrade its existing coal and/or wood kilns with new high temperature kilns which use shredded rubber from used tyres as fuel.

The by-product from the incinerated steel in the tyres is able to be re-used to contribute to iron requirements of cement.

The substitution of rubber biofuels for coal reduces emissions by 13,000 tonnes per year, or the equivalent of emissions from 6000 cars.

Mr Shepherd said as well as the environmental benefits, the construction of the new equipment will provide jobs and may increase the permanent workforce in Portland.

Mr Smith said 5 million waste tyres are generated every year.

"We have dozens of tyre stockpiles around the country posing a fire risk, leaching contaminants, providing a breeding ground for rodents and insects, and blotting the landscape."

However Community Recycling chairman Marty Hoffart said the initiative is not going to stop illegal dumping of tyres.

"No because all the money is going to infrastructure."

Mr Hoffart said tyre shops charge a disposal fee to customers, but often get rid of their tyres, using tyre cowboys, illegal dumping and cutting them up, for less than that fee.

"Tyre shops don't like to pay more than they have to, to get rid of their tyres."

Mr Hoffart said tyre shops aren't going to want to pay to ship their tyres around the country.

"There's no incentive for the tyre shops to participate if they can get rid of them cheaper."

He said the solution is regulation in the shape of a compulsory product stewardship scheme. The disposal fee would remain and become an advanced payment for the recycling.