The firm behind the £100 million replacement for the Baldovie incinerator in Dundee said construction work would continue.
The combined heat and power facility is being built by energy company MVV in partnership with Dundee City and Angus councils and Michelin, which had planned to use heat generated by the plant.
Paul Carey, managing director of MVV Environment Baldovie, would not be drawn on the economic implications on the incinerator project when the factory closes.
He said: “Clearly, this is devastating news for Dundee. We are considering the situation, but the construction of the new energy from waste combined heat and power facility will continue.”
The new incinerator will last for 25 years and burn about 110,000 tonnes of waste each year, mostly from Dundee City and Angus councils.