The local authority had been in discussions with New Earth Solutions since April 2011 regarding the plant, but said after a "detailed and thorough review", the 24-year contract would not go ahead.
The £2.4m project would have been constructed at Easter Langlee and aimed to divert a large proportion of waste from landfill, as well as create renewable energy from waste.
Planning permission for the development, as well as the latter stages of the operational permit application process with SEPA for a renewable energy plant had been reached. It had also achieved a permit for mechanical treatment of waste and the production of refuse-derived fuel.
However, the council has said "significant changes" have been made with regards to Scottish waste policy and regulation since the contract was signed, in addition to project-specific issues in terms of technology and funding.
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The implementation issues were not able to be resolved by the parties involved and on Thursday (19 February), the unanimous decision was made to approve a report recommending the termination of the contract.
SBC has said it will now carry out a review of its Integrated Waste Management Strategy, ensuring its waste services are fit for purpose and financially sustainable in the long term.
Councillor David Parker, Leader of the Scottish Borders Council, said: "Both the Council and New Earth have put in considerable effort to overcome issues related to the integrated waste management facility project, but ultimately time ran out to find a resolution.
"The Council thanks New Earth for the close working relationship both organisations have had since April 2011.
"Despite this setback, SBC is as committed as ever to providing Borders' residents with a waste service which meets Scottish and EU targets, and is also sustainable for many years to come."
Darren Stockley, Managing Director of New Earth, added: "New Earth was delighted to have been awarded the contract by Scottish Borders Council in 2011 and we have invested considerable resources in developing the project.
"We have worked closely with the Council's project team on delivering an innovative solution, but some of the challenges were taking too long to resolve.
"New Earth wishes the Council every success with its future plans to reduce waste, increase recycling and divert waste from landfill. New Earth remains committed to providing sustainable waste treatment services to local authorities and the commercial sector at our six operational facilities."
(JP/MH)
