Our options for sending plastics overseas for other countries to process has also become more limited, with China banning imports on more than 20 types of foreign waste.
However, a packaging industry group said there had been a noticeable shift in interest to compostable packaging by consumers - and toward smart innovation by manufacturers.
One young Auckland company, Innocent Packaging, is now making products entirely from plant-based materials, after making a moral decision to stop selling coffee cup lids made from environmentally-harmful polystyrene and PET, or Plastic 1.
Managing director Tony Small said his firm took an estimated $100,000 hit in the process.
"The idea was, that if we were going to be preaching about it, we didn't really want to be selling polystyrene lids at the same time," he said.
"It was a big hit and we definitely lost a lot of business - and it means it is tougher in some tenders for us.
"But in the long-run, it's been positive and I think we've actually gained a lot more business from it."
Small said the company's lids took only around 12 weeks to compost.
While there remained limited infrastructure in New Zealand to compost packaging commercially, there were emerging schemes and plants to deal with more of our plastic load.
Plastic 1, or PET, could now be processed at Flight Plastics' new wash plant in Lower Hutt, meaning PET drinks bottles, food trays and fruit punnets could be turned back into new food packaging here.
The Packaging Forum was running a soft plastics recycling scheme, taking three types of plastics and operating separately from kerbside collections, which recovered everything from bread bags and confectionery wrappers to sanitary hygiene wrapping.
The forum has also set up a working group comprising all of the major coffee cup manufacturers, companies that used them and recycling firms to develop a long-term strategy for dealing with them after use.
It was estimated around 300 million hot and cold cups are sold in New Zealand annually.
The group further commissioned Tauranga-based waste management service Beyond the Bin to assess the various cups on the market and to identify facilities around the country which could take compostable cups.
Hospitality New Zealand had observed a change among its members to more sustainable products, including compostable cups and re-usable steel straws, although coffee cup lids remained a problem, spokeswoman Rachael Shadbolt said.
"What we have been seeing in recent years is that technology has moved on, toward plant-based products that can now cope with liquid, without the bottom falling out."
Small said China's decision had sent a clear signal to his industry.
"With China reducing what waste they are taking from the rest of the world, it's going to become very hard to recycle.
"So we can either continue using what we are using and send it to landfill, which is very short-sighted, or we can start using more sustainable products which have a more circular life-span."
