Unplanned waste disposal in developing countries is the result of increasing population which causes serious environmental threats. Potential of waste to energy production and its impact on reduction of greenhouse gas (GHG) emission may play significant role through economic and environmental returns. This study focuses on assessment of economic and environmental benefits from conversion of waste to energy. The estimated municipal solid waste generation rate is 660 tons/day in Islamabad that can generate millions kilowatt-hour of electricity and will generate millions of rupees as electricity revenue. In this study, anaerobic digestion (AD) technique was considered for estimation of electricity generation from the waste. Production of biogas is 51322 cubic meter per day from organic fraction of waste of Islamabad that is 380 tons per day in 2014. The average electric power generation potential from AD plant is 104973.4 kWh per day that can generate PRs. 289 million annually net benefit from sale of electricity. For economic analysis of the project, net present value (NPV), internal rate of return (IRR), benefit cost ratio (BCR) and payback period (PBP) were estimated which show feasibility of the project. Results show that NPV is PRs. 1113.9 million at 12% discount rate, IRR is 22%, BCR is 3.28 and PBP is 4.8 years. PBP calculated in the study shows that the project will take to pay back its initial cost in almost 4.8 years. Sensitivity analysis was performed to investigate the effect of 10 %, 20 % and 30 % increase in capital cost on feasibility of project. It is estimated that with increase in capital cost by 30% NPV changed to 701.8 million, IRR reduced to 17%, BCR is 2.84 and PBP increases to 6.1 years. Environmental benefit of conversion of municipal solid waste into energy was also estimated. It was found that 206.84 tons CO2eq emission could be reduced or saved by 2030 due to this project. It was found that AD of municipal solid waste of Islamabad is a feasible option for production of renewable energy, waste management and emission reduction. Supervisor:- Dr. Zeshan