The money will help the government and Katherine town council work out how the facility will work and where it will be located.

The money comes from the government's Circular Economy Strategy released in April which outlined a roadmap to protecting the environment from waste by increasing resource recovery, recycling and reuse, including phasing out and banning single use plastics by 2025 and investing and supporting businesses to develop and resource their own recycling schemes.

In February the government had announced it would co-fund a new $7.2 million Materials Recovery Facility for recycling in Katherine with the federal government.

It comes in the nick of time as the outdated and nearing capacity current landfill site needed to be closed and covered within five years.

Now the government said it has commissioned an independent review of the NT landfill guidelines to deter landfilling of recyclables and ensure protection of the environment and is reforming environmental regulation of mining with a cost benefit analysis of implementation of waste levies.

The government is calling them "circular economy initiatives" and says Territory businesses are getting on board with waste and debris from numerous projects being repurposed into new builds.

Chief Minister Natasha Fyles said applying circular economy principles means turning waste into a valuable resource, which keeps it out of the environment where it can cause harm, and inside the economy where it can create value, jobs and growth.

Minister for Environment, Lauren Moss said more than a third of the Territory's waste is generated from construction, demolition, commercial and industrial activities.