As the world's population continues to increase, demand for a variety of commodities will also increase. More food, energy and materials are all needed to support the planet's new citizens. This ever-increasing amount of consumption has an unintended side effect: more waste. With the focus of many national governments towards "greener" policies, carbon and waste reduction is quickly becoming a top priority. Fortunately, there is a form renewable energy that is gaining momentum that can help on both fronts.

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Drilling the Pile
Most consumers are blissfully unaware of what happens when they throw something away. However, new technologies are making it possible for that garbage to become energy. As chemical reactions and microbes break the waste in a landfill it creates gas that has a large methane component. Instead of letting the gas escape into the atmosphere, many new projects are collecting this gas and treating it. It then can be used for powering homes, buildings and vehicles.

According to the EPA, the number of nationwide landfill gas plants has risen from 399 in 2005 to more than 500 today. With more than 6,000 landfills across the United States, the potential for the sector is huge and several states have seen that potential. A law enacted by the Californian Air Resource board requires that all landfills within the state install methane capturing equipment by 2012.

It's not just the United States that is getting bullish on landfill gas. Across Europe, there are about 400 landfill energy plants. Denmark, Germany and the Netherlands are the leaders in waste to energy production. A recent report from England's Cranfield University showed that the United Kingdom could meet its 2020 renewable energy goals by more than 50% by using waste to energy plants. South Korea has recently partnered with Air Products (NYSE:APD) to build a hydrogen fueling station for fleet vehicles. The hydrogen gas will solely be produced from neighboring landfills. Other emerging market nations such as China and India have embraced landfill gas as a way to meet their growing energy needs.

The Big Players
Landfill gas represents a great long-term play on the need for more energy to power the planet. Unlike solar and wind energy, where many of the players are small start-ups, the waste to energy sector is full of large companies. Investors wanting to add more of a renewable energy "sure-thing" should look towards the sector.

As the two largest environmental services companies in the United States, both Waste Management (NYSE:WM) and Republic Services (NYSE:RSG) have been very active in the area. Waste Management currently runs 115 of these projects, but plans to increase that number to 170 by 2013. Republic has recently partnered with Clean Energy Fuels (Nasdaq:CLNE) to construct a renewable bio-methane gas processing facility. The gas will then be injected into natural gas pipelines for consumer use. Each of these stocks offers stable dividends, 3.6% in the case of Waste Management and represents the leaders in the industry.

While most investors think of Cummins (NYSE:CMI) engines powering their Dodge Ram pick-up truck, the company produces a variety of generators designed to run on alternative gases including landfill gas. The stock has more than doubled since its 52-week low, but still trades at a forward P/E of 15. Cummins also could see revenue gains as the natural gas boom continues to take off. Shares of the industrial yield 1%. Investors wanting a speculative play in the sector can add Capstone Turbine (Nasdaq:CPST).

For investors wanting a pure play on the growth of waste to energy, Covanta (NYSE:CVA) operates 56 landfill generation facilities in the United States, and eight in Europe and Asia. The company has recently made a string of deals including purchasing a transfer station along with six waste-to-energy plants from Veolia (NYSE:VE). Covanta isn't cheap, trading at P/E of almost 37 and is more levered than Waste Management or Republic. Investors still might want to go with the big boys in the space.

The Bottom Line
As world populations continue to grow, use more energy and create more waste, finding solutions to tackle these problems is increasingly important. New technologies in waste to energy and landfill gas collection have opened up the ability to drill the pile and meet increasing energy requirements. The proceeding stocks are just some of the leaders in the sector. (Put a little green in your wallet by investing in these growing areas. See Top 10 Green Industries.)

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Tickers in this Article: APD, WM, RSG, CLNE, CMI, CPST, CVA, VE, EVX

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