North Lanarkshire Council had gone to the Court of Session to seek a ruling preventing award-winning butcher Simon Howie's Shore Energy firm from building a "pyrolysis" waste-burning plant at a landfill site at Carnbroe, Coatbridge.
But yesterday Lord Stewart said the plant can go ahead, over-ruling the objections of more than 4000 people who fear it could pose a health risk and will bring down house prices.
The plant, which will burn 160,000 tonnes of waste rubbish and turn it into energy, had previously been rejected by the council and then approved after an appeal to the Scottish Government.
The legal challenge that has now gone against the council was launched in January after the Scottish Government decision, and exploratory works have continued at the site while both parties waited on the court's decision.
Pyrolysis involves burning the high-temperature treatment of waste to generate fuel and energy. The plant is due to open in 2013, creating 50 jobs.
Mr Howie said it would also provide an economic boost for the area, and criticised the council for spending money on legal fees instead of local services.
Labour MSP Elaine Smith said: "The people of Coatbridge have made it clear they do not want this plant and it is disgraceful that the Scottish Government has refused to listen."