Recognizing the advantages of waste-to-energy (WtE) combustion over landfills, China is rapidly expanding WtE capacity nationwide to address the escalating urban waste crisis. This study compiles a comprehensive WtE facility-level database between 2000 and 2020 to examine waste–energy–carbon dynamics and improvement potential. Whereas WtE expansion has notably reduced greenhouse gas emissions and recovered energy compared with landfills, these facilities remain carbon intensive and are increasingly outperformed by coal-fired power plants within China’s electricity grid. The main challenges facing WtE are the growing plastic content in waste streams and limited advancements in energy efficiency. Given WtE’s dual role in waste management and the national grid mix, it is crucial to balance capacity expansion with carbon intensity reduction. The high-resolution database provides geographically tailored strategies based on local waste characteristics and facility performance, indicating that effective waste classification and equipment upgrades could decarbonize WtE power generation by half to natural gas levels by 2060.