Covanta (NYSE:CVA) is a leader in the energy from waste, or EfW, sector, benefiting from green power government mandates. However, it's really a one trick pony. That's why trash collecting competitor Waste Management's (NYSE:WM) recent power deal with Seattle is so interesting.

We'll make more
Garbage is a blight on society, particularly with our aptitude for making it. For many years we just shoved it into landfills and pretended it didn't exist. Well, we make too much for that system to last. That's where a company like Covanta comes in. Covanta uses rubbish as a fuel in its power plants.

That's a great idea and one that has key supporters like Boston and New York City. And Covanta using trash as fuel has serious green credentials. According to a June 25, 2014 press release, Covanta states, "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."

The only problem is that Covanta operates in the merchant energy space, which has been a tough market lately because of relatively low natural gas prices. The power company's bottom line dipped into the red in 2013, capping three consecutive years of earnings declines.

Waste Management there and beyond
Waste Management is right there with Covanta, too. It wrote down the value of its trash burning power operations last year, and it was a big write-off ($1.85 a share) that pushed earnings down nearly 90% year over year. In fact, it just announced plans to jettison the division because management isn't convinced it can be turned around. However, burning trash isn't the only way that Waste Management makes power.

Remember those landfills? They're still around and being used. And, as Covanta highlighted, the decomposition creates methane gas that leaks into the atmosphere. Well, what if you collected that methane and turned it into something useful? That's exactly what Waste Management does at over 130 landfill gas to energy projects.

(Source: Ropable, via Wikimedia Commons)

In fact, it plans to double the capacity at one of its landfill sites in Washington state, adding four new turbines. Gas is collected from 85 wells at the location, which is the end repository for two million tons of human garbage every year. This expansion will help support Waste Management's power sales to Seattle City Light. After the new turbines are installed, Waste Management's landfill will produce enough electricity to power over 12,000 Seattle homes.

Not the main line
Creating power from landfill gas isn't Waste Management's main business. At its core, it's a trash hauler. But that sets it apart from Covanta, where burning trash is pretty much the company's bread and butter. This, however, just makes Waste Management an even better green investment. Not only is the company making a shift toward recycling, but it's making better use of what it already has in place.

And green regulations make assets like landfills even more valuable. Washington state has a mandate that utilities get 15% of their power from renewable sources developed after 1997. Columbia Ridge, the landfill in question, didn't start producing power until 2009. The expansion plans will double the landfill's power output. And Seattle City Light gets to count all of that generation toward Washington's renewable mandate.

(Source: ReubenGBrewer, via Wikimedia Commons)

How big of an opportunity is this? The Columbia Landfill will produce enough power to light up 12,000 or so homes. Waste Management's landfill power business currently produces enough power for roughly 500,000 homes. (For reference, that offsets the use of two million tons of coal.) Since that power is produced from around 130 facilities and Waste Management owns over 260 landfills, there's clearly plenty of room to grow the landfill gas to power business.

Although Waste Management's bottom line has been in something of a funk since the 2007-2009 recession, its dividend has continued to rise. Essentially, the company is changing with the times and shifting toward a green business model. That takes time and costs money, but it is paying shareholders to stick around through the transition. If you are looking for an environmentally friendly investment, Waste Management should be on your watch list.