Gloucestershire CC has been awarded£92m worth of private finance initiative (PFI) credits to upgrade its waste facilities.
The credits, announced by the Department for Environment, Food and Rural Affairs, will be worth£171m over the lifetime of the contract.
Gloucestershire CC has set a target to recycle or compost 60% of its waste by 2020 - 10% above the national target.
The south west council currently landfills about 190,000 tonnes of household waste every year. Landfill tax is set to rise to£48 per tonne by 2010.
The plans could deliver estimated net carbon savings of 33,800 tonnes by 2020, compared to the current arrangements, or 64,700 tonnes if combined heat and power is used.
The project is being delivered as part of the Joint Municipal Waste Management Strategy, which has been adopted by Gloucestershire and the countyís six district councils.
The council will be issuing a notice to prospective bidders in the Official Journal of European Union in the New Year. The waste industry will be asked to come forward with bids in early 2009, after which the selection of a PFI contractor is expected to take two years.