Wellington is unable to achieve its carbon and waste reduction targets as long as the landfill is needed for disposing sludge.
About 374,000 tonnes of sludge is processed at Moa Point treatment plant annually - a quantity which is expected to increase as the population grows.
But, at the same time, volumes of solid waste are projected to decrease as the city council moves on waste minimisation.
This is a problem because sludge is disposed of by mixing it with solid waste at the landfill, which can be no less than a ratio of 4:1 solid waste to sludge.
The volume of sludge being produced is already close to exceeding that consented ratio.
Meanwhile, Wellington City Council has set targets including reducing the total quantity of waste sent to municipal landfills by one third.
It also wants to achieve net zero carbon emissions by 2050.
Solid waste and wastewater treatment accounts for a whopping 88 per cent of the council's gross emissions.
Agenda documents for the council's Infrastructure Committee said the current method of disposing of sludge "severely constrains" waste minimisation and carbon reduction.
The situation is effectively preventing the city from achieving its environmental objectives.
"The interdependency between sewage sludge disposal and the Southern landfill must be broken", the documents said.
Mayor Andy Foster said if the amount of rubbish going into the landfill was reduced the council would literally have to cut parts of the hillside off to mix with the sludge, which was clearly not tenable.
"If we want to reduce waste, we have to reduce the volume of sludge", he said.
Wellington Water has come up with a plan at Moa Point where sludge would be stabilised in large heated digestion tanks which capture methane.
The sludge would then be dried out using heat, creating an end product of stable granules, which do not need to be disposed of at the Southern landfill.
The alternative method would reduce the volume of waste by about 80 per cent.
Early estimates suggest this infrastructure would cost up to $208 million.
Councillors will be considering the issue next week.
Disposal of organic matter, including sludge, in an environmentally friendly manner is a big problem globally. It is often incinerated, which is a huge source of carbon emissions.
But a New Zealand company called Terax is also working on an alternative.
It's one of eight teams participating in a 12-week Wellington-based Climate Response Accelerator programme run by Creative HQ.
It offers startup teams from around Aotearoa $20,000 equity-free funding, as well as mentorship, connections, and resources to help advance each stage of their growth.
Terax Chief Commercialisation Officer Rob Lei said they hoped to commercialise its organic matter processing technology.
"To provide an economic and environmentally friendly solution for the treatment of sludge and other organic matter here in NZ and globally."
Terax's process, developed at Scion in Rotorua, breaks down organic matter using a combination of anaerobic fermentation and wet oxidation technology.
This creates a solid ash vinegar-like liquid product.
Lei said the ash contained phosphorus and can be used as a fertiliser.
"Terax is delighted to be working with CreativeHQ in the Climate Response Accelerator to progress the commercialisation of its technology, he said.
"The accelerator will provide us with funding, guidance and support in order to get this exciting innovation to market."