But the £10.6 million Mechanical Biological Treatment (MBT) plant that has been earmarked for a site on Knowsleys Huyton Industrial Estate is still subject to public consultation and planning permission.
The pilot project, which could be a template for further future plants, will see non-hazardous household waste converted into high quality green fuel using a patented process called Mechanical Heat Treatment (MHT).
The process, which uses hot air, is seen as an environmentally-friendly alternative to traditional incineration and landfill options and will recover a range of recyclable materials that would otherwise be landfilled.
It represents a partnership between the Department for Environment, Food and Rural Affairs (Defra), Merseyside Waste Disposal Authority (MWDA) and the Northwest Regional Development Agency.
MWDA director Carl Beer said: The Government has staked a lot of money on this project because it recognises that it has real potential to make a difference across the UK.
From a Merseyside point of view, this will save money by relieving the massive pressure on landfill. Just by diverting up to 30,000 tonnes of biodegradable waste a year from landfill it will have the potential to save council taxpayers £1.5 million.
If the project gains approval it hopes to be up and running by the end of 2007.
MWDA chairman councillor Kevin Cluskey added: It will by no means solve all Merseysides waste problems. However, it demonstrates the kind of creativity and commitment we have got to show if we are ever going to get to grips with the vast mountains of waste currently sent to landfill.
The contract with Defra is for Fairport Engineering to run the demonstration process until April 2009. But MWDA says if it is successful the plant could be an element of its future waste management strategy.