It is understood the £177m project by Viridor will be located at the firm's existing rail linked Oxwellmains waste treatment hub.
The company has said the facility is vital to Scotland's plans to become a zero waste nation.
In conjunction with Viridor's investment in a Scottish £125m network of recycling-led infrastructure, the ERF project will also see around 300,000 tonnes of waste a year incinerated, thereby preventing it from being sent to landfill sites.
The site will generate 30MW of base-load renewable energy direct to the grid, said to be enough to continuously power 39,000 homes, while up to 10MW of heat could be made available for local use.
Throughout the construction process, Viridor has said at least 350 jobs will be created, including professional, skilled, entry-level roles and apprenticeships.
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The facility is expected to take around 36 months to be created, with a scheduled completion date of December 2017. When operational, the facility will support 55 full-time jobs and contribute £10m to the East Lothian economy each year.
Ian McAulay, Chief Executive of Viridor, said: "I am pleased to announce final approval for our £177m Oxwellmains energy recovery facility project, our latest investment in Scotland's green economy.
"With an ambitious zero waste agenda focused on waste reduction, reuse, enhanced recycling and recovering energy from what remains, Scotland is realising the value of waste as a resource, rather than something that is simply thrown away.
"Achieving not only cleaner, greener waste management, but a truly integrated Scottish secondary resource sector embedded in the supply chain will require major investment to translate policy into practice. That's why Viridor has announced investment of £357m in Scotland in the last eighteen months alone.
"We look forward to announcing further information shortly regarding our technology and construction partners, and our programme of community benefits including opportunities for small businesses and local recruitment."
Richard Lochhead MSP, Cabinet Secretary for Rural Affairs, Food and Environment, added: "This is a significant investment, which will reduce the amount of waste going to landfill while generating energy to the grid.
"The Scottish Government has always made it clear that there can be a role for energy recovery from the limited amount of residual waste as landfill is phased out.
"This sits alongside our internationally ambitious targets for waste prevention and recycling as part of a suite of measures to make Scotland a greener, cleaner place to live."
(JP/MH)
