MPs have called for a 25p "latte levy" to be added to the price of drinks sold in disposable coffee cups in a bid to improve recycling rates.
Ministers sitting on the Environment Audit Committee have argued that the charge will encourage consumers to buy reusable cups.
Funds raised through the levy would be invested in recycling plants able to process plastic-lined disposable cups.
Currently just four recycling companies in the UK can process such cups, meaning just 0.25% are recycled.
Chair of the committee Mary Creagh MP said: "The UK throws away 2.5 billion disposable coffee cups every year; enough to circle the planet five and a half times.
"Almost none are recycled and half a million a day are littered. Coffee cup producers and distributors have not taken action to rectify this and government has sat on its hands.
"The UK's coffee shop market is expanding rapidly, so we need to kick start a revolution in recycling. We're calling for action to reduce the number of single-use cups, promote reusable cups over disposable cups and to recycle all coffee cups by 2023."
The committee has called on the government to ban disposable coffee cups if all are not being recycled by 2023.
MPs reported that only 1%-2% of customers take advantage of discounts offered to those using reusable cups and highlighted the success of the plastic bag levy to support their argument.
But, the Association of Licensed Multiple Retailers has said the levy will hit small and medium sized businesses and is not the answer.
Chief executive Kate Nicholls said: "Efforts to reduce waste are welcome and steps to tackle environmental damage are laudable, but the major concern here is that a "latte levy" will simply increase costs for businesses without having any discernible effect in tackling the problem.
"Small and medium-sized businesses will be particularly vulnerable to cost increases and many of them will find it difficult to absorb this cost or even pass it onto customers as the cost of the cup is already factored into the price.
"Efforts by businesses to tackle the issue are recognised in the report and some of the ALMR's members have begun loyalty schemes or provided discounts for customers using their own reusable cups.
"Steps such as these help address waste without increasing costs for businesses and actually save customers money."
Lin Dickens, marketing director, Bartlett Mitchell, said: "We welcome any measures which aim to directly tackle the coffee packaging issue. The initial analysis highlighted the complexities around the recycling of coffee cups, and the operational challenges of introducing reusable only cups to cafes and restaurants across the industry.
"What's clear is that the will is there but the industry needs to work together to find alternative and sustainable solutions which are not only robust from an environmental perspective, but also stand up commercially.
Bartlett Mitchell has seen a 200% increase in the take up of its new range of Keep-cups, which entitle customers to a coffee discount.
Costa has a similar scheme to reduce the use of a disposable cups.
A spokesperson said: "Through our nationwide in-store recycling scheme we have recovered over 12 million cups for recycling since February 2017 but understand the serious need to ensure better infrastructure is available outside of our stores.
"To encourage our customers to use reusable cups we already offer a 25p discount, which we will be further promoting this year.
"We believe the Government must consider a mix of measures to address this issue with a focus on improving the UK's waste and recycling infrastructure."
Mike Turner of the Paper Cup Alliance said paper cups remain a "sustainable and safe solution" for takeaway drinks.
He said: "The paper cups we manufacture in the UK are sustainably sourced, responsibly produced, recyclable and, through a number of facilities, are being recycled. We are committed to increasing recycling rates.
"Taxing the morning coffee run will not address the issue of litter, but it will hurt consumers and impact already struggling high streets."
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