A government plan to shut the plant last year was thwarted because it also processes waste from the local community, and closure would have meant the effluent would flow directly into the lake.

Now the Natural Resources Ministry has ordered the local government to end its dependence on the paper plant for its waste treatment and build a waste processor of its own by mid-August.

The paper plant then has another month to improve its own waste treatment system, the ministry said in a statement.

"These are logical steps and I hope this agreement will be completed," the head of the Russian office of environmental group WWF, Igor Chestin, said.

"There should not be any waste going into Lake Baikal."

Lake Baikal in Siberia is the world's deepest lake, holds around 20 percent of Earth's freshwater supplies and is home to hundreds of unique animal and plant species.

Chestin said although the plant -- 51 percent owned by Basic Element, the industrial conglomerate controlled by Russia's richest man Oleg Deripaska -- treated the waste to Russian standards it did not meet the stricter regulations at Lake Baikal.

Continental Management, owned by Basic Element, which controls the plant has told Reuters it has a system ready to divert waste from the factory away from the lake but that it could not use it until the town had developed its own system.

The plant spews tonnes of treated waste -- both household and industrial -- every year into the lake killing a delicate organism called epishura, Chestin said.

"This is the organism which keeps the water so clean and it's unique to Baikal," Chestin said.

Earlier this month, a regional court dismissed a pollution claim for about $25,000 by the western region of Lake Baikal against the paper mill as excessive.

It did say though the plant had polluted the lake and smaller compensation would be considered, Itar-Tass news agency reported.