Cheshire West & Chester and Cheshire East Councils have jointly agreed to cap spending on the forthcoming 25-year waste disposal private finance initiative.
The figure is reliant on £100m of PFI credits from central government and based on projected alternative landfill disposal costs. Payments will be made by the two councils based on the tonnage of waste delivered.
Cllr Peter Mason, cabinet member with responsibility for procurement at Cheshire East, said: "Ensuring the safe and appropriate removal of waste for recycling is a key priority for Cheshire East Council, as is reducing the amount of waste sent to landfill.
"It is vital we work together with Cheshire West & Chester Council to find a long-term solution for the benefit of the county as a whole."
Steve Kent, community and environment director at Cheshire West & Chester, added: "Despite the great strides we have made with recycling, we still sent 190,000 tonnes of waste to landfill last year.
"And even if we achieve our ambitious future re-cycling targets, we would still expect to be sending 155,000 tonnes to landfill annually."
He added: "Declining landfill space and increasing costs, an average of £800,000 each year, mean that doing nothing is definitely not an option, certainly not one that will be appreciated by future generations."
The spending cap is part of the process of choosing a PFI partner. Planning applications from contenders Resource Recovery Solutions and Viridor will be considered by Cheshire West & Chester's strategic planning committee on 17 June, at Wyvern House, Winsford.
Viridor has proposed a mechanical and biological treatment plant at the former Ineos chemical works at Griffiths Road, Northwich, which will recover the limited recyclable materials from household waste and use the remainder to produce a solid recoverable fuel. This fuel will be transported by rail to a new power station at Runcorn, which in turn will generate energy for use by Ineos.
RRS plans a waste treatment plant at New Cheshire Business Park in Wincham, using gasification technology to generate renewable energy from left-over, non-recycled waste. The two authorities are hoping to appoint a preferred bidder in October.