The controversial system at the heart of the Government's waste strategy kicked off last Friday.
Councils now have annual limits to how much household waste they can dump in the ground, under the Landfill Allowance Trading Scheme (LATS).
Local authorities can trade tonnages among themselves, as well as borrowing from their future allowances and banking unused space.
As it was launched by Environment Minister Elliot Morley today, critics claimed the chance to sell landfill use would lead to lots of recyclable waste being incinerated.
Friends of the Earth senior waste campaigner Claire Wilton said: "We urgently need to drive waste away from landfill, but not into the arms of incinerator operators.
"The Government must remove the financial incentive to incinerate rubbish and introduce higher national recycling targets."
But Morley welcomed LATS and backed its encouragement of incineration.
He said: "The scheme will not only help to reduce the amount of waste going to landfill, but will encourage local authorities to promote waste minimisation and to use positive methods of waste management such as reuse, composting, recycling and energy recovery."
Doubts over the merits of the system have been raised before.
The Local Government Association (LGA) spoke out against data shortages when the 121 waste disposal authorities were given their landfill allocations in February.
LGA Senior project policy officer for the environment Alice Roberts said: "If local authorities don't have sufficient knowledge of what the 120 other councils will trade, then the flexibilities of LATS are lost."
This view was then supported by the Environment, Food and Rural Affairs Committee last month.
MPs on the committee said it was not clear that the Government's data strategy included the information vital for LATS to work.
But the Government retains confidence in its system.
Morley added: "LATS is an innovative and flexible approach which moves Government away from the old tools of command and control by offering an alternative to the regulatory system of inflexible targets.
"The scheme is the first of its kind in the municipal waste sector, but trading schemes have already been used successfully across the world in other sectors, most notably to reduce emissions to the atmosphere."
Under the Landfill Directive, in 2010 the UK can only send to landfill 75% of the biodegradable municipal waste it produced in 1995.
This means the UK can only landfill 11.2 million tonnes in 2009/10 - compared with 20.9m in 2003/4.