A town meeting tonight — bearing the almost irresistible slogan "Bundy on tap" — will ask for a formal show of hands on the proposed ban.

All the shops in Bundanoon have shown some support for a ban, agreeing to lose some over-the-counter income to combat the hefty carbon footprint associated with bottling tap water and trucking it around the state.

"It's also a moral thing," said Huw Kingston, who owns a combined cafe and bike shop in the town, "...in that it has just been such a wonderful marketing job by the beverage industry, selling people something they can have for free."

Beverage companies say bottled water is a healthier alternative to soft drinks.

But the plastic bottles are made from oil and are mostly thrown away rather than refilled.

The bottled water industry caused the release of 60,000 tonnes of greenhouse gas in 2006, a NSW Department of Environment and Climate Change study found. Since then sales have grown. Australians spent about $500 million on bottled water last year, a 10 per cent increase on the year before numbers.

Jon Dee, director of environment group Do Something!, sees the campaign as similar to the decision to ban plastic bags in the Tasmanian village of Coles Bay in 2003.

"The community reaction in Coles Bay was very good," he said, "...and I hope that if people do see the benefits of having free filtered water fountains in Bundanoon, then they will go for the alternative."

Other places in Australia and overseas have discouraged the sale of bottled water but Bundanoon is thought to be the first to move towards an outright ban.

Filtered water fountains will be provided on the main street so people can fill bottles free of charge.

The catalyst for the ban is a proposal by Sydney company Norlex Holdings to build a water extraction plant in the town. It was initially turned down, but Norlex has appealed and the case is before the NSW Land and Environment Court.