The citizens of Neustadt an der Weinstrasse take their recycling very seriously. So much so that there is even a collection point at the recycling depot for dead animals.

"People bring their dead dogs here," says Stefan Weiss, one of the town's waste managers, as he steps into a refrigerated shed and opens the lid on a wheelie bin containing a deer's head recently deposited by a local hunter.

"All these animals get rendered down at a nearby facility for their fat. It then gets used to produce things like this." Weiss pulls a tube of lip balm from his pocket.

Located in the south-western state of Rheinland-Pfalz and set in the heart of Palatinate wine-growing region, the predominantly middle-class, medieval town of Neustadt boasts the best recycling rates in Germany. Over the past 30 years, the town has nurtured and refined a system that means it now recycles about 70% of its waste – 16% higher than the state target. By comparison, UK recycling rates average about 40% – up from just 5% in the mid-1990s.

The reason for Neustadt's success is simple, says Weiss. "It's all about providing financial incentives and education. We don't charge citizens anything for the recycled waste they leave out. And the less waste you put out for incineration – we've had no landfill in Germany since 2005 – the less you pay.

"Having no incentive to reduce waste is poisonous to your aims. We have a separate, visible fee that is intentionally not embedded within a local tax."

For example, the majority of Neustadt's 28,000 households opt for a 60-litre bin for their non-recycled waste. This is collected once a fortnight and costs the household €6.60 in collection fees. If a household opts for a 40l bin, the fee falls to €5.30. Conversely, if they opt for a 240l bin (the standard wheelie bin volume in the UK), the fee rises to €24, or €48 if they want it collected weekly. If they produce higher than expected waste due to, say, having a party, they can buy special 60l plastic sacks for €3 and leave them out by their bins for collection.

When it comes to recycling, householders are asked to sort their items and bag them into three groupings: paper/cardboard; glass; and plastics/foils/cans. The latter grouping goes into a yellow bag and can include anything from Styrofoam and yoghurt pots through to aluminium foil and Tetrapaks. Compost bins are provided for those with gardens to dispose of organic waste. Everything else — batteries, toys, timber, old TVs, tins of paint, dead pets — must be taken to the recycling depot a mile or so from the town centre.

Larger loads of waste – debris from a house renovation, say – can be dumped at the depot for a fee of €5 for loads up to 100kg, although households are limited to one load a week.

Bigger loads command much higher commercial fees. For those without a car, a calendar is provided each year to households marking pick-up days for different types of waste, or private firms are available to take away waste on demand for a fee.

"We started this simple fee system in 2006 and we find it works," says Weiss.

"We have been sorting our waste since the early 1980s, but in 1989 we joined up with other towns in the region and formed our own waste company to process the waste more efficiently. Our waste costs are actually lower now than when we started and we even turn a slight profit some years when the commodity prices are high. As a non-profit, this money just gets reinvested."

Further proof that the system works is provided by neighbouring regions which use different systems. For example, one charges according to the number of people who live in the home, whereas another offers one option: a weekly collection of a 100l bin. "These regions both produce 100kg more waste per person per year than we do here," says Weiss. But he also believes that Neustadt has probably gone as far as it can with maximising recycling. "Getting to 80% would be impossible. There are behavioural issues such as those few people who still mix up their waste. Plus, there is a fixed percentage of people who live in high-density housing without access to gardens or outside storage."

Gabrielle Stahl lives on a hill overlooking the town in the leafy suburb of Hambach. She didn't even know Neustadt boasted Germany's best recycling rates, but isn't surprised: "We are all very normalised to the system here. There is no controversy or debate whatsoever about our rubbish."

Stahl, who lives with her husband and shares bins with her mother who lives next door, opens the cupboard beneath her sink to reveal two waste caddies containing vegetable peelings and non-recyclable domestic waste. In the cellar below, the family stores its bottles and "yellow bag" material.

They have paid extra to have a dedicated wheelie bin for their paper and card outside. "The bags kept splitting," she explains.

One day every fortnight, four lorries pull up outside Stahl's home to separately collect each waste stream. "If they miss a bag, you just ring them up and a car comes back to collect it. Once or twice a year, I will drive down to the depot and get rid of things like old furniture or a broken appliance, but that's it. And in the summer, I buy a chemical patch from the supermarket to stick on the inside of the bin to kill the flies and maggots.

"The only thing that could be improved is that I would like a separate collection for organic waste as sometimes I produce too much for my compost heap."

Back at the recycling depot, Stefan Weiss moves on to the subject of enforcement. Or rather, the lack of it. "In theory, we have the power to fine people if they don't sort their waste. But we never do this because it costs too much to investigate. And we just don't have an issue with flytipping because we make the system so cheap and easy to use. We still get the odd complaint about the move to fortnightly collections, or that our bins are ugly, but that really is about it."

A car towing a trailer full of construction waste pulls up at the weigh-station by the entrance gate. Weiss wanders over to inspect the contents. "This weighs about half of tonne. If will cost €270 to dump it as it is. Or if the car owner sorts it into separate types of waste — timber, paper, plasterboard etc — it will cost him just €17. That, in summary, is our system. We provide a major incentive to recycle."