The CEFC says it is open to funding projects that would see rubbish burned for energy.

The Clean Energy Finance Corporation (CEFC) has never invested in an incineration energy project before, but says it would look at financing one if the right application was made.

“There are modern energy from waste projects which employ best-practice combustion technology operating in Europe today that would potentially meet the CEFC's criteria for investment, if deployed in Australia,” a CEFC spokesperson has told reporters.

It comes after Energy and Environment Minister Josh Frydenberg sent a letter to CEFC in April calling on the group to look at the idea.

“I would like to encourage the board to consider further prioritising waste-to-energy projects, particularly those involving the avoidance of landfill,” the letter reads.

It was sent in response to China's decision to restrict importation of recyclable waste.

Greens senator Peter Whish-Wilson says incineration is a form of “surrender” to recycling challenges.

“Not only will it dramatically undermine public support and cooperation with domestic household recycling but it will result in governments at all levels giving up on seeking solutions to develop a circular economy,” he said.

“Incineration is what households used to do to dispose of their household rubbish in the 1950s and 60s, it is not a solution to the current problems.”