The aim is to boost recycling and reduce landfill waste
Five councils in England are to be allowed to pilot "pay as you throw" household waste charges.
Councils will have to prove they have schemes that "fit local circumstances" and any money raised will be repaid to residents overall, says the government.
The UK has to reduce waste going into landfill by nearly two thirds by 2020 to meet EU targets.
The Tories say the schemes will cost councils up to £700,000 to set up and run and will encourage flytipping.
Powers to allow local councils to give financial incentives to encourage recycling - and issue fines for those who do not - were included in the Climate Change Bill.
'Checks and balances'
Under proposals outlined earlier this year, households which recycle the most could get an annual discount of up to £50, while those which recycle the least could be charged up to £50.
The Department for the Environment, Food and Rural Affairs (Defra) announced on Thursday that a maximum of five pilot schemes would be allowed, and their success would be judged before they are rolled out more widely.
But those applying to pilot a scheme have to have "checks and balances" - like a fly-tipping prevention strategy and good kerbside recycling services - and ensure any money raised is paid back to residents overall.
In a Parliamentary statement, waste and recycling minister Joan Ruddock said: "The case for reducing the amount of waste we all produce is clear - it is damaging the environment and contributing to climate change.
"Furthermore it makes no financial sense to keep dumping it into holes in the ground.
"We need to work out the best way to achieve this. Local authorities have asked for incentive schemes as one of their options."
She said responses to Defra's 12-week consultation showed strong support from councils for a "pay as you throw" scheme.
But the Conservatives said council tax payers would end up paying more to cover the set-up and running costs of the schemes and say they cannot be "revenue neutral".
Defra says it will contribute £1.5m a year for three years to support the pilot schemes.
But it says the start-up costs, estimated at £100,000-£200,000 and running costs of up to £500,000 a year for a 50,000 household scheme, will be borne by local authorities.
Shadow local government secretary Eric Pickles said "bin taxes" would lead to "a surge in fly-tipping and back garden burning".
He added: "To add insult to injury, the cost of fitting Bin Brother microchips and computer databases, new wheelie bins, complex bills and chasing non-payers, will far outweigh any savings.
"Bin taxes are so expensive to introduce that taxes on families will have to rise as result, through higher council tax bills. Everyone will lose out, whether you recycle or not."
The government argues that the schemes would form part of the fight against climate change, as methane from landfill sites make up about 3% of the UK's greenhouse gas emissions.
It is also under pressure to reduce biodegradable waste going to landfill to meet an EU directive - from the 18.1m tonnes dumped in 2003/4 to 6.3m in 2020.