Industry and local government will have to recycle 65 per cent of their packaging waste by 2010 under an agreement signed yesterday by federal, state and territory environment ministers.

Environment groups welcomed the agreement and said the policies underpinning the national packaging covenant would help industry and local government recycle more than the current 48 per cent of waste.

A recycling lobby group, the Boomerang Alliance, congratulated the Environment Minister, Bob Debus, for his "strength and persistence" on the issue.

But the alliance was disappointed that the target for recycling plastics was only 30 per cent. This could mean paper and aluminum had been set a target of 80 per cent, which was too high, said its co-ordinator, Dave West.

Each year NSW generates about a million tonnes of packaging waste such as food and beverage containers, cardboard boxes and plastic wrapping.

The packaging covenant is voluntary, but a review in 2008 will consider whether recycling targets should become mandatory.

"We remain hopeful industry can play a much more active and responsible role in cutting waste," said a spokesman for Mr Debus.

Under the covenant, industries that use materials that are difficult to recycle, such as some plastics, will have to develop recycling systems and recycle at least 25 per cent of the material by 2010