The nearest recycling centre to Horncastle is at Kirkby on Bain, but that is scheduled to close later this year.
Using this facility involves an average 10-mile return journey - half the distance of the planned new site at Tattershall Lagoons.
In a report drawn up by officers, the council says the new centre could save £200,000 a year.
The council’s Environment and Economy Scrutiny Committee was asked to support the construction of the new centre at a meeting yesterday (Tuesday).
The Kirkby on Bain centre is privately owned by FCC Environment who are due to decommission the site this year.
Although the council’s contract for the service expired in 2020, it has an agreement to maintain the service until the end of 2021.
The new centre, on a closed landfill site that the council owns at Tattershall Lagoons, will initially cost £1,950,000 to build.
The council estimates annual running costs of £138 to £192,000 a year.
The current contract at Kirkby on Bain is worth £425,000 a year.
With that in mind, council officers say the new site could bring savings between £208 and £287,000 - depending on whether the management of the site is provided by external contractors or run in-house.
The report says there is an option not to provide a replacement facility, which would save the £1.95m initial cost and the £425,000 a year, but would leave Horncastle-area residents without a recycling centre.
The report adds: “Proceeding with the construction of a new centre will maintain the service in the Horncastle area and meet [policy] requirements.
“The service is highly valued by the public and this has been demonstrated by the changes which were brought about due to the Covid-19 pandemic which caused a significant increase in complaints.
“If a site is not provided, residents of the Horncastle area will have to travel a further distance to dispose of their household waste, which will increase damage to the environment through longer car journeys.
“This would also increase pressure at the nearest centres such as Market Rasen, Lincoln and Sleaford.”
If approved, council officers hope to submit plans by March and begin building the new centre in June for a potential November opening.