We've been powering this nation with carbon-intensive fuels for so long that we seem to have forgotten the many alternatives at our disposal. I'm not talking about solar and wind, I'm talking about refuse. This niche power source may be small today, but in a carbon-conscious world it could become much more important. That's doubly true if Russia's global provocations get U.S. natural gas exports heading higher: Watch Covanta (NYSE:CVA) and Waste Management (NYSE:WM).

Boston loves garbage
Covanta is a power company with a twist because it burns trash. While that may not be particularly environmentally friendly on the face of things, take a step back. Ask yourself what would happen if Covanta didn't burn the trash it collects to generate electricity. That refuse would end up in a landfill and some other source of base-load power, which increasingly means carbon-emitting natural gas would be tapped instead.

(Source: Yuyudevil, via Wikimedia Commons)

That's why the city of Boston recently extended its relationship with Covanta for another four years. The energy from waste (EfW) specialist will take 140,000 tons of Boston rubbish each year. How good an environmental deal is this? According to Covanta, "For every ton of municipal solid waste processed at EfW facilities, greenhouse gas emissions are reduced by the equivalent of approximately one ton. This is due to the avoidance of methane from landfills, the offset of greenhouse gases from fossil fuel electrical production, and the recovery of metals for recycling."

Is burning trash a profitable business?
So burning our waste for power is a good thing, but how does it stack up financially? That's a tougher question to answer. For example, Covanta's top line has fallen in each of the last three years, and it lost a nickle a share in 2013.

Waste Management, another trash hauler, also has an EfW division. In the fourth quarter last year Waste Management wrote down the value of its EfW division by a massive $1.85 per share, pushing earnings for that period well into negative territory at a loss of $1.29 per share.

The nearly $500 million impairment charge was the result of low power prices. And a big part of that trend is tied to the historically low price of natural gas. This is essentially the same reason that utilities like Dominion Resources (NYSE:D) have been selling merchant power plants, particularly those reliant on coal.

Dominion Resources has instead been building out its green fleet. For example, its $3.4 billion of capital spending planned on the generation side of its business between 2014 and 2018 includes such things as solar, wind, and biomass conversions. But biomass is, essentially, burning things like wood waste. Although burning wood is different than burning trash, it's basically the same idea. In fact Europe is also burning a lot more wood to keep the environment clean. Trash, as Covanta explained, has some serious green cred, too. Over time, look for EfW to look increasingly desirable.

Russia on offense
Essentially, power companies around the world are reexamining their fuel options and finding some new, or perhaps old, ways to keep the lights on and help the environment at the same time. But what does this have to do with Russia?

CVA Chart

CVA data by YCharts

Russia is currently in a dispute with Ukraine over natural gas that could threaten natural gas supplies into Europe. Some in the U.S. government are looking to capitalize on this window of opportunity to make it easier to export the fuel, an activity that is currently heavily restricted. In fact, Dominion Resources is one of the many companies looking to open a liquefied natural gas export hub.

With the United States increasingly using natural gas and the potential for global turmoil to open up the export market, gas prices could start heading higher over the long term. That would make other fuel options, such as garbage, more competitive. This, in turn, would make EfW companies more valuable.

Waste Management is a hedged bet on the space because EfW is a small portion of its overall business. Covanta, however, is a direct play that's still off its pre-recession highs. Don't overlook this dirty business -- you know the old saying, "One man's trash is another man's treasure..."