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About 45 minutes north of downtown Los Angeles, a machine the size of a small truck flattens tons of food scraps, paper towels and other household rubbish into the side of a growing 90m pile.

To Waste Management, which operates the landfill, this is more than just a mountain of rubbish. Pipes tunnelled deep into the mound extract gas from the rotting waste and send it to a plant that turns it into electricity.

It looks like an ordinary hillside and doesn't smell, but produces enough energy to power 2500 homes in southern California.

Rubbish, trash, garbage, whatever you call it, the 1.6 billion tonnes of stuff the world throws away each year - 250kg per person - is being touted as a big potential source of clean energy and

more companies are investing in ways to use methane gas to power homes and vehicles.

Around the world, landfills are one of the biggest producers of methane, a gas whose greenhouse effect is 21 times worse than carbon dioxide. If that gas is collected and burned to generate electricity, proponents say the resulting emissions of carbon dioxide are less harmful to the environment than the original methane.

Environmentalists aren't quite as enthusiastic. Nathanael Greene, director of renewable energy policy for the Natural Resources Defence Council, says touting the benefits of landfills is akin to putting "lipstick on a pig". Instead, we should be trying harder to reduce waste.

Biogas, another name for methane produced from waste, manure or other organic matter, is most developed in Europe, where Germany has 70 per cent of the global market. In Britain, landfill gas makes up a quarter of the country's renewable energy, giving electricity to some 900,000 homes.

Waste-to-energy projects are also being expanded in the developing world.

Despite the arguments about how "green" landfill gas really is, companies such as Waste Management and Allied Waste are benefiting from their growing new revenue streams.

Allied Waste's senior director of renewable energy development, Ted Neura, says the company generates less than 5 per cent of its revenue from sales of electricity, but is evaluating how best to develop its landfills.

Houston-based Waste Management, which produces energy at 100 of its 280 US landfills, plans to spend US$400 million ($506 million) over the next five years to build an additional 60 landfill gas-to-energy plants.

In its latest effort, Waste Management last month joined a growing number of companies that are using waste to power vehicles. In California, the company is building the largest-ever facility to turn landfill gas into liquefied natural gas to fuel its heavy-duty garbage collection trucks.

But big, established companies aren't the only ones using waste to replace fossil fuels. One start-up company, Boston-based Ze-gen, is creating what it says is a zero-emissions process for producing electricity from construction waste that it is diverting from landfills.

Ze-gen turns waste into syngas, a combination of hydrogen and carbon monoxide.

General Electric is also working to adapt its gasification technology - used to burn coal more cleanly - to turn municipal waste into a cleaner-burning gas.

Solena Group, which is backed by Spanish conglomerate Acciona, is developing a facility in California to make renewable jet fuel from municipal waste and BlueFire Ethanol Fuels is building its first cellulosic ethanol plant adjacent to a landfill in Lancaster, California, so it can use municipal waste as its feedstock.

"It was the lowest-risk feedstock," says Arnold Klann, president and chief executive of BlueFire Ethanol. "We are taking the material that society values the least and converting it into a transportation fuel."