SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

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/ / Soliciting Material Pursuant to Rule 14a-12

COVANTA ENERGY CORPORATION
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)

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/X/ No fee required.
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[LOGO]

Covanta Energy Corporation
40 Lane Road
Fairfield, New Jersey 07004

April 20, 2001

TO OUR SHAREHOLDERS:

On behalf of the Board of Directors, it is my pleasure to invite you to
attend Covanta Energy Corporation's 2001 Annual Meeting of Shareholders to be
held at the Essex House hotel, 160 Central Park South, New York, New York at
9:30 a.m. (Eastern Daylight Savings Time), on Wednesday, May 23, 2001.

The matters to be acted upon at the meeting are described in the attached
Notice of Annual Meeting and Proxy Statement which we urge you to read
carefully. Time will be set aside at the meeting for discussion of each item of
business described in the Proxy Statement as well as any other matters of
interest to you as a shareholder.

Shareholders who find it convenient are cordially invited to attend the
meeting in person. It is important that your shares be represented at the
meeting. Accordingly, whether or not you expect to attend, you are urged to
sign, date and return the enclosed proxy card in the enclosed postage paid
envelope to ensure that your shares will be represented at the Annual Meeting.

GEORGE L. FARR
CHAIRMAN OF THE BOARD

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF COVANTA ENERGY CORPORATION

Notice is hereby given that the Annual Meeting of Shareholders of Covanta
Energy Corporation ("Covanta") will be held at the Essex House hotel, 160
Central Park South, New York, New York 10019 on Wednesday, May 23, 2001, at
9:30 a.m. (Eastern Daylight Savings Time), for the following purposes:

(1) To elect four directors to hold terms of office expiring at the Annual
Meeting of Shareholders in 2004 and until their respective successors have
been elected and qualified;

(2) To ratify the appointment of Deloitte & Touche LLP as auditors of Covanta
and its subsidiaries for the year ending December 31, 2001;

(3) To consider and act upon a proposal made by a shareholder to "urge the Board
of Directors to obtain prior shareholder approval for all future agreements
that provide compensation for senior executives if there is a change in
control of the Company"; and

(4) To consider and act upon such other business as may properly come before
this Annual Meeting.

The Board of Directors has fixed April 9, 2001 as the record date for this
Annual Meeting and all shareholders of record of Covanta at the close of
business on such date shall be entitled to notice of and to vote at this Annual
Meeting.

By Order of the Board of Directors

JEFFREY R. HOROWITZ,
SENIOR VICE PRESIDENT, LEGAL AFFAIRS
AND SECRETARY

Dated: Fairfield, New Jersey
April 20, 2001

IMPORTANT

PLEASE DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED STAMPED, ADDRESSED ENVELOPE, SO THAT YOUR SHARES MAY
BE VOTED IF YOU ARE UNABLE TO ATTEND THIS ANNUAL MEETING.

PROXY STATEMENT

The following statement is submitted to shareholders in connection with the
solicitation of proxies for the Annual Meeting of Shareholders of Covanta Energy
Corporation ("Covanta" or the "Company") to be held on Wednesday, May 23, 2001
at 9:30 a.m. (Eastern Daylight Saving Time) at the Essex House hotel, 160
Central Park South, New York, New York 10019 (the "Annual Meeting"). A proxy
card for this Annual Meeting is enclosed. This Proxy Statement and the
accompanying proxy card are first being sent to shareholders on or about
April 20, 2001.

The purposes of the Annual Meeting are:

(1) To elect four directors to hold terms of office expiring at the Annual
Meeting of Shareholders in 2004 and until their respective successors have
been elected and qualified;

(2) To ratify the appointment of Deloitte & Touche LLP as auditors of Covanta
and its subsidiaries for the year ending December 31, 2001;

(4) To consider and act upon such other business as may properly come before
this Annual Meeting.

The solicitation of proxies to which this Proxy Statement relates is made by
and on behalf of the Board of Directors of Covanta. The costs of this
solicitation will be paid by Covanta. Such costs include preparation, printing
and mailing of the Notice of Annual Meeting, proxy cards and Proxy Statement.
The solicitation will be conducted principally by mail, although directors,
officers and employees of Covanta and its subsidiaries (at no additional
compensation) may solicit proxies personally or by telephone and telegram.
Arrangements will be made with brokerage houses and other custodians, nominees
and fiduciaries for proxy material to be sent to their principals, and Covanta
will reimburse such persons for their expenses in so doing. Covanta is also
retaining D.F. King & Co., Inc. to solicit proxies and will pay D.F. King &
Co., Inc. a fee of $8,500 in connection therewith.

The shares represented by all valid proxies in the enclosed form will be
voted if received in time for this Annual Meeting in accordance with the
specifications, if any, made on the proxy card. If no specification is made, the
proxies will be voted FOR the nominees named in this Proxy Statement, FOR
Proposal (2) and AGAINST Proposal (3) as set forth above and described in this
Proxy Statement. Each proxy is revocable at any time prior to being voted by
delivering a subsequent proxy, by giving written notice to the Secretary of
Covanta or by attending this Annual Meeting and voting in person, provided

that such action must be taken in sufficient time to permit the necessary
examination and tabulation of the revocation or the subsequent proxy before the
vote is taken.

VOTING SECURITIES

As of April 9, 2001, the record date for this Annual Meeting, Covanta had
outstanding 49,754,105 shares of Common Stock and 35,312 shares of $1.875
Cumulative Convertible Preferred Stock, Partially Participating, excluding
shares held in Covanta's corporate treasury. Each share of Common Stock is
entitled to one vote and each share of preferred stock is entitled to one-half
vote per share on all matters to come before this Annual Meeting, including the
election of directors.

Covanta has been advised by Greenway Partners, L.P., Reich & Tang Asset
Management L.P., FMR Corp. and Dimensional Fund Advisors, Inc. that they, along
with certain members of their group or respective investment managers, are each
the beneficial owner of more than 5% of Covanta's Common Stock, which shares
were acquired for investment purposes for certain of their advisory clients. The
following table sets forth certain information concerning the foregoing:

NAME AND ADDRESS AMOUNT AND NATURE PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- -------------- ---------------------------------------- ----------------------- --------

Common............... Greenway Partners, L.P. 6,289,800 shares (1 ) 12.7
277 Park Avenue, 27th Floor
New York, New York 10017

Common............... Reich & Tang Asset Management L.P. 3,009,900 shares (2 ) 6.1
600 Fifth Avenue
New York, New York 10020

Common............... FMR Corp. 2,896,030 shares (3 ) 5.8
82 Devonshire Street
Boston, Massachusetts 02109

Common............... Dimensional Fund Advisors, Inc. 2,502,789 shares (4 ) 5.0
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401

- ------------------------

(1) A Schedule 13D/A Report dated March 12, 2001 shows that 380,000 shares are
held with sole voting power, 5,909,800 shares are held with shared voting
power, 380,000 shares are held with sole dispositive power and 5,909,800
shares are held with shared dispositive power.

(2) A Schedule 13G Report dated February 15, 2001 shows that 3,009,900 shares
are held with shared voting power and 3,009,900 shares are held with shared
dispositive power.

(3) A Schedule 13G/A Report dated February 14, 2001 shows that 499,900 shares
are held with sole power to vote or to direct the vote and 2,896,030 shares
are held with sole power to dispose or direct the disposition thereof.

(4) A Schedule 13G Report dated February 2, 2001 shows that 2,502,789 shares are
held with sole power to vote or to direct the vote and sole power to dispose
or direct the disposition thereof.

The proxy card provides space for a shareholder to withhold voting for any
or all nominees for the Board of Directors, or to abstain from voting for any
proposal if the shareholder chooses to do so. Each nominee for election as a
director requires a plurality of the votes cast in order to be elected.
Proposals (2) and (3) require the affirmative vote of the holders of a majority
of the votes represented by shares present at the Annual Meeting, in person or
by proxy and entitled to vote. With respect to the election of directors, only
shares that are voted in favor of a particular nominee will be counted towards
achievement of a plurality; where a shareholder properly withholds authority to
vote for a particular nominee such shares will not be counted towards such
nominee's or any other nominee's achievement of plurality. With respect to the
other Proposals to be acted upon: (i) if a shareholder abstains from voting on
the proposal, such shares are considered present at the meeting for quorum
purposes but, since they are not affirmative votes for the proposal, they will
have the same effect as votes against the proposal and (ii) under Delaware law,
shares registered in the names of brokers or other "street name" nominees for
which proxies are voted on some but not all matters will be considered to be
voted only as to those matters actually voted, and will not have the effect of
either an affirmative or negative vote as to the matters with respect to which
the broker does not have authority to vote and a beneficial holder has not
provided voting instructions (commonly referred to as "broker non-votes").

COMMITTEES OF THE BOARD OF DIRECTORS

COMPENSATION COMMITTEE. The Compensation Committee is composed of four
independent "non-employee directors" within the meaning of Rule 16b-3
promulgated under Section 16(b) of the Securities Exchange Act of 1934, as
amended, and "outside directors" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended, who are not employees or members of
management of Covanta or any of its subsidiaries. The Compensation Committee is
responsible for reviewing and approving compensation and benefit plans for
Covanta and providing independent judgment as to the fairness of the
compensation and benefit arrangements for senior management of Covanta and its
subsidiaries. The Compensation Committee determines the method of payment to be
used for performance-based compensation; recommends the amount and form of
remuneration for

non-employee members of the Board of Directors; determines the Chief Executive
Officer's compensation; and reviews and approves the annual salary, bonus and
other benefits, direct or indirect, of other designated members of senior
management of Covanta and its subsidiaries. There were eight meetings of the
Compensation Committee during 2000.

AUDIT COMMITTEE. The Audit Committee is composed of four independent and
financially literate non-employee outside directors as those terms are used in
the New York Stock Exchange rules, one or more members of which has accounting
or financial management expertise. The Audit Committee's principal functions are
to evaluate and review financial procedures, controls and reporting; compliance
with Covanta's Corporate Policy of Business Conduct; recommend to the board
external auditors; approve the budgeted fees for external audit services;
nominate to the Chairman of the Board Covanta's Chief Accounting Officer; and
consult with the Chief Executive Officer, Chief Financial Officer, Chief
Accounting Officer and the internal auditor as to any significant risks or
obligations. The Committee also assesses measures taken by management to manage
these risks; assesses the manner and extent of the audit to be carried out by
Covanta's internal and external auditors; reviews the adequacy of internal
controls; discusses the results of the annual audit with the external auditors;
reviews annually the business expenses of the members of the Board of Directors
and the Chief Executive Officer; and reviews with management all interim and
audited financial statements contained in reports filed with the Securities and
Exchange Commission. There were six meetings of the Audit Committee during 2000.

GOVERNANCE COMMITTEE. The Governance Committee is composed of five
independent non-employee outside directors. The Governance Committee's principal
functions are to review and evaluate Covanta's Board practices. In particular,
the Committee will be responsible for monitoring and making recommendations on
issues such as Board size and composition, and CEO performance. The Committee
reviews, on an ongoing basis, the Board's performance as a whole as it relates
to recognized "best Board practices" in the area of corporate governance. The
Committee also makes recommendations to the Board of Directors with respect to
nominees for new directors (including nominations submitted in writing by
shareholders in compliance with the requirements of Covanta's By-laws) and board
committee memberships with direct input from the Chairman of the Board of
Directors, Chief Executive Officer and the other directors. There were six
meetings of the Governance Committee during 2000.

FINANCE COMMITTEE. The Finance Committee is composed of five independent
non-employee outside directors. The principal responsibilities of the Finance
Committee are to review cash management policies, procedures and performance;
Covanta's banking relationships; and corporate transactions involving
investments, divestitures, loans, guarantees and expenditures involving
transactions exceeding $25 million. The Committee also reviews the annual
capital plan of investment results,

strategic asset allocation, balance sheet structure and the management of equity
capital and risk management techniques. The Committee also submits a report of
its activities to the Board of Directors at least annually. There were four
meetings of the Finance Committee during 2000.

During 2000 the Board of Directors held six regularly scheduled meetings and
four special meetings. Each incumbent director attended at least 75% of the
aggregate 2000 meetings of the Board of Directors and of the committees on which
such director served.

DIRECTOR COMPENSATION

(a) Directors Fees

Each director who is not an employee of Covanta or a Covanta subsidiary
receives an annual director's retainer fee of $35,000 plus a meeting fee of
$1,500 for each Board of Directors meeting attended. Each non-employee director
will also receive a meeting fee of $1,500 for each committee meeting attended.
All directors are reimbursed for expenses incurred in attending Board of
Directors and committee meetings. Directors who are employees of Covanta or a
Covanta subsidiary receive no additional compensation for serving on the Board
of Directors or any committee.

(b) Stock Options

Pursuant to the Covanta Amended and Restated 1999 Stock Incentive Plan (the
"1999 Plan"), the Board of Directors may award annual grants of Directors Stock
Options and limited stock appreciation rights of up to 2,500 shares of Covanta
Common Stock to each non-employee director, at an exercise price equal to the
Fair Market Value on the date of grant. On January 20, 2000, each non-employee
director was granted an option for 2,500 shares at an exercise price of $12.9688
per share, the Fair Market Value of a share of Covanta Common Stock on the date
of grant. Each option is a ten year grant vesting at the rate of 33.3% each year
over a period of three years.

On February 17, 2000 the Board of Directors adopted the Covanta Restricted
Stock Plan for Non-Employee Directors (the "Director's Restricted Stock Plan")
which is administered by the Board of Directors and provides that only
non-employee directors are eligible to receive awards. Each award of restricted
stock will vest upon the earliest of the third month following the date of
grant; the non-employee director's attainment of age 72; the non-employee
director's disability; or the non-employee director's death. Shares are freely
transferable after they become vested subject to meeting certain SEC
requirements. All unvested shares of restricted stock are forfeited upon the

director's termination of directorship for any reason, other than death or
disability. Shares become fully vested upon a change-in-control of the company.
Shares of Common Stock to be issued under the Director's Restricted Stock Plan
will be made from shares held in Covanta's treasury, the maximum aggregate
number of shares authorized to be issued is 100,000 shares and the purchase
price for each share issued is zero.

Under the Director's Restricted Stock Plan, each non-employee director will
automatically be paid in the form of restricted stock as follows: (i) 50% of the
director's annual retainer fees as of the first Board Meeting of each fiscal
year based on the closing price of a share of Common Stock on the date of such
meeting and (ii) 50% of the director's meeting fees as of the last day of each
calendar quarter in which such meeting occurs based on the average closing price
of a share of Common Stock for the calendar quarter. In the event of a
change-in-control of Covanta, shares of restricted stock which would otherwise
be made on the last day of the calendar quarter in which the change-in-control
occurs, will be made on the date of the change-in-control.

In recognition of the special role that Mr. Farr is performing as Covanta's
Chairman of the Board, the Board of Directors authorized a special compensation
package for Mr. Farr that will apply only during the period of time in which he
is serving in this special role. The compensation package provides for a monthly
retainer of $35,000, payable 50% in cash and 50% in restricted stock at the end
of each quarter, commencing during the first quarter of 2000 and subject to
review by the Compensation Committee on a quarterly basis. During this period of
time Mr. Farr will not be paid any director or committee retainer or meeting
fees.

SECURITY OWNERSHIP BY MANAGEMENT

Information about the Common Stock beneficially owned as of March 31, 2001
by each nominee, each director, each executive officer named in the summary
compensation table and all directors and executive officers of Covanta as a
group is set forth as follows:

AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1)(2)
- ------------------------ ---------------------------

Anthony J. Bolland............................ 36,656(3)
Paul B. Clements.............................. 79,369(4)
Lynde H. Coit................................. 108,665(4)
Raymond E. Dombrowski, Jr*.................... 32,500(4)
Norman G. Einspruch........................... 18,815(3)
George L. Farr................................ 179,629(3)
Jeffrey F. Friedman........................... 34,838(3)
Jeffrey R. Horowitz........................... 64,668(4)
Scott G. Mackin............................... 458,800(4)
Craig G. Matthews............................. 0
Judith D. Moyers.............................. 11,728(3)
Homer A. Neal................................. 5,422(3)
Robert E. Smith............................... 5,952(3)
Bruce W. Stone................................ 46,662(4)
Joseph A. Tato................................ 1,466
Helmut F.O. Volcker........................... 32,735(3)
Robert R. Womack.............................. 6,211
All executive officers and directors as a
group
(27 persons) including those named above.... 1,485,338(5)

- ------------------------

(1) Except as otherwise noted, each individual owns all shares directly and has
sole investment and voting power with respect to all shares. No officer or
director owns shares of Covanta Series A Preferred Stock.

(2) The beneficial ownership of each individual is less than 1.0% of the class.

(3) Includes: 11,667 shares for Mr. Bolland, 1,667 shares for Dr. Einspruch,
48,667 shares for Mr. Farr, 16,667 shares for Mr. Friedman, 1,667 shares for
Ms. Moyers, 1,667 shares for Dr. Neal, 1,667 shares for Mr. Smith and 21,667
shares for Dr. Volcker, subject to stock options which are exercisable and
restricted stock which will vest within 60 days of March 31, 2001. Also
includes:

2,735 shares held by Dr. Einspruch in a Keogh Plan and 14,202 shares held in
a revocable trust, 100,000 shares held by a partnership in which Mr. Farr is
a partner, 12,000 shares held by Mr. Friedman in an IRA, and 100 shares held
by Dr. Neal jointly with his wife over which Dr. Neal has shared voting and
investment authority with his wife.

(4) Includes: 72,668 shares for Mr. Clements; 100,000 shares for Mr. Coit;
20,000 shares for Mr. Dombrowski; 58,668 shares for Mr. Horowitz; 406,000
shares for Mr. Mackin; and 18,332 shares for Mr. Stone, subject to stock
options which are exercisable within 60 days of March 31, 2001.

(5) Includes 1,119,339 shares subject to stock options which are exercisable and
restricted stock which becomes vested within 60 days of March 31, 2001.

*Mr. Dombrowski resigned his position on January 22, 2001. See "Employment
Contracts, Termination of Employment and Change in Control Arrangements" below.

ELECTION OF DIRECTORS--PROPOSAL NUMBER (1)

PROPOSED ACTION

The Covanta Board of Directors is proposing the election of four directors.
The directors will be elected for terms expiring at the Annual Meeting of
Shareholders in 2004 and until their respective successors have been elected and
qualified.

DESCRIPTION OF PROPOSAL

The Board of Directors has nominated the four persons named in the table
below for election as the class of Directors whose terms expire at the 2004
Annual Meeting of Shareholders and until their respective successors are elected
and qualified. Covanta has no reason to believe that any such nominee will be
unable to serve as a director if elected, but if any nominee should subsequently
become unavailable to serve as a director, the persons named as proxies, or
their respective substitutes, may, in their discretion, vote for a substitute
nominee designated by the Board of Directors or, alternatively, the Board of
Directors may reduce the number of directors to be elected at this Annual
Meeting.

Messrs. Smith and Bolland were elected directors at Covanta's 1990 and 1998
Annual Meeting of Shareholders, respectively. Mr. Mackin was appointed a
director and President and Chief Executive Officer of Covanta in
September 1999. Prior thereto, Mr. Mackin served as an Executive Vice President
of Covanta and since 1991 he has served as President and Chief Operating Officer
of Covanta Energy

Group, Inc., a major subsidiary of Covanta. Mr. Matthews has been nominated to
replace Judith D. Moyers, who will be retiring from the Board following the 2001
Annual Meeting.

Mr. Matthews graduated from Rutgers University in 1965 with a Bachelor's
Degree in Civil Engineering and in 1971 obtained his M.S. Degree in Industrial
Management/Finance from Polytechnic University. Since 1965, Mr. Matthews has
held various management positions in the corporate planning, financial,
marketing and engineering areas of Brooklyn Union Corporation. Since 1991, he
has served as Executive Vice President with responsibility for Brooklyn Union's
financial, gas supply, energy-related investments and information systems and
strategic planning functions. On May 28, 1998, Brooklyn Union's parent company
merged with Long Island Lighting Company, forming a company called KeySpan
Corporation. On January 28, 1999, Mr. Matthews was promoted to President and
Chief Operating Officer of KeySpan and President and Chief Operating Officer of
its major subsidiary, KeySpan Energy Delivery, formerly the Brooklyn Union
Corporation. On March 1, 2001, Mr. Matthews was named KeySpan's Vice Chairman
and appointed to its Board of Directors. Mr. Matthews is a member of the Board
of Directors of the American Gas Association and Chairman of the Board's
Research Committee. He is also a director of the Houston Exploration Company and
KeySpan Corporation.

NOMINEES

The following table sets forth certain information concerning the nominees
for election as directors.

FIRST BECAME
NAME, AGE, AND OTHER INFORMATION TERM TO EXPIRE PRINCIPAL OCCUPATION A DIRECTOR
- -------------------------------- -------------- ------------------------------- ------------

Anthony J. Bolland: Age 47..... 2004 Managing Director, Boston 1998
Chairman of Covanta's Finance Ventures Management, Inc.
Committee and member of
Covanta's Audit Committee;
Director of Production Resource
Group, Inc. and Northern Light
Technology Corporation.

Scott G. Mackin: Age 44........ 2004 President and Chief Executive 1999*
Officer, Covanta and Covanta
Energy Group, Inc., a Covanta
subsidiary

FIRST BECAME
NAME, AGE, AND OTHER INFORMATION TERM TO EXPIRE PRINCIPAL OCCUPATION A DIRECTOR
- -------------------------------- -------------- ------------------------------- ------------

Craig G. Matthews: Age 57...... 2004 Vice Chairman and Chief --
Director of the Houston Operating Officer, KeySpan
Exploration Company and KeySpan Corporation; President and
Corporation Chief Operating Officer of its
principal subsidiary, KeySpan
Energy Delivery

Robert E. Smith: Age 65........ 2004 Counsel, Rosenman & Colin LLP, 1990
Member of Covanta's Audit and a law firm.
Governance Committees.

- ------------------------

* Mr. Mackin was appointed a director and President and Chief Executive
Officer of Ogden Corporation by the Board of Directors on September 16, 1999
to fill a vacancy created by the resignation of a director whose term would
have expired in 2001.

DIRECTORS WHOSE TERMS CONTINUE

The following table sets forth certain information concerning directors
whose terms are continuing.

FIRST BECAME
NAME, AGE, AND OTHER INFORMATION TERM TO EXPIRE PRINCIPAL OCCUPATION A DIRECTOR
- -------------------------------- -------------- ------------------------------- ------------

George L. Farr: Age 60......... 2002 Principal, Muirhead Holdings, 1999
Chairman of Covanta's Board of LLC; former Vice Chairman,
Directors; Director of Swiss American Express Company.
Reinsurance Co., Zurich,
Switzerland; Director of MISYS
PLC, London, England.

Jeffrey F. Friedman: Age 54.... 2002 Investment Manager, Dreyfus 1998
Chairman of Covanta's Audit Corporation.
Committee and member of
Covanta's Finance Committee.

FIRST BECAME
NAME, AGE, AND OTHER INFORMATION TERM TO EXPIRE PRINCIPAL OCCUPATION A DIRECTOR
- -------------------------------- -------------- ------------------------------- ------------

Helmut F.O. Volcker: Age 66.... 2002 Professor of Energy Technology, 1994
Member of Covanta's Governance University of Essen, Germany.
and Finance Committees; Chairman
of the Technical Advisory Board,
Alstom Power Boiler GmbH,
Stuttgart, Germany.

Norman G. Einspruch: Age 68.... 2003 Professor and Senior Fellow, 1981
Chairman of Covanta's College of Engineering,
Compensation Committee and University of Miami.
member of Covanta's Finance
Committee.

Homer A. Neal: Age 58.......... 2003 Samuel A. Goudsmit 1988
Chairman of Covanta's Governance Distinguished University
Committee and member of Professor of Physics and
Covanta's Compensation Director of Project Atlas,
Committee; Director of Ford University of Michigan.
Motor Company.

Joseph A. Tato: Age 47......... 2003 Member, LeBoeuf, Lamb, Green & 2000
Member of Covanta's Governance MacRae, LLP, a law firm.
and Finance Committees.

Robert R. Womack: Age 63....... 2003 Retired Chairman and CEO, Zurn 2000
Member of Covanta's Audit and Industries, Inc.
Compensation Committees;
Chairman of the Board of
Precision Partners, Inc.;
Director of Commercial Metals
Company and U.S. Industries,
Inc.

VOTE REQUIRED

Election of directors is by a plurality vote. Accordingly, the four persons
nominated in accordance with Covanta's By-laws who receive the greatest number
of affirmative votes will be elected.

RECOMMENDATION

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF ALL FOUR NOMINEES NAMED ABOVE AS DIRECTORS--PROPOSAL NUMBER (1)

RATIFICATION OF AUDITORS--PROPOSAL NUMBER (2)

PROPOSED ACTION

Shareholders are requested to ratify the continued appointment of
Deloitte & Touche LLP as auditors of Covanta and its subsidiaries for the year
2001. A representative of Deloitte & Touche LLP is expected to be present at
this Annual Meeting with the opportunity to make a statement if he or she
desires to do so and to respond to appropriate questions.

DESCRIPTION OF PROPOSAL

Deloitte & Touche LLP has been Covanta's auditors since 1951. Audit and
other services rendered by Deloitte & Touche LLP for the fiscal year ended
December 31, 2000, in addition to the audit of the consolidated financial
statements, included: review of financial and related information that is to be
included in filings with the Securities and Exchange Commission; consultation
during the year on matters related to accounting and financial reporting; audits
of financial statements of certain subsidiary companies; audits of employee
benefit plans contained in filings required pursuant to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"); consulting services; and
meeting with Covanta's Audit Committee on matters related to the audit. Although
Covanta is not required to submit the selection of auditors to the shareholders
for ratification, it has elected to do so. In the event such selection is not
ratified, Covanta would consider the selection of other auditors for fiscal
years after 2001. However, it would not be possible to replace Deloitte & Touche
LLP as auditors for the 2001 fiscal year without significant disruption of
Covanta's business.

VOTE REQUIRED

The affirmative vote of the holders of a majority of the votes present at
this Annual Meeting in person or by proxy and entitled to vote will be required
to approve the continued appointment of Deloitte & Touche LLP as auditors of
Covanta and its subsidiaries for the year 2001.

RECOMMENDATION

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR PROPOSAL
NUMBER (2)

SHAREHOLDER PROPOSAL--PROPOSAL NUMBER (3)

Amalgamated Bank Long View MidCap 400 Index Fund ("Amalgamated") has been
the beneficial owner of shares of the Company's Common Stock with a market value
of at least $2,000, has held such shares continuously for at least one year and
has advised it intends to maintain such ownership through the date of the 2001
Annual Shareholders Meeting. Amalgamated has submitted the following resolution
and supporting statement for inclusion in this Proxy Statement and will cause
the resolution to be introduced at the Annual Shareholders Meeting:

RESOLVED: The shareholders of Ogden Corporation ("Ogden" or the "Company")
urge the Board of Directors to obtain prior shareholder approval for all future
agreements that provide compensation for senior executives if there is a change
in control of the Company.

SUPPORTING STATEMENT

Ogden Corporation has entered into employment agreements with its Chief
Executive Officer and several other senior officers, which agreements provide
these officers with special severance compensation in certain situations where
there is a change in control of the Company.

These severance agreements, commonly known as "golden parachutes," provide
that if the covered officers resign or are terminated under circumstances
covered by the employment agreement, the CEO shall be entitled to receive a cash
payment equal to the product of five times his base salary at the highest annual
rate in effect at any time prior to the termination date, and the highest amount
of annual bonus payable at any time prior to the termination date and, if
applicable, an additional payment equal to the amount of any excise tax imposed
on any payments under the agreement (including the additional payment) under the
excess parachute payments of the Internal Revenue Code. Other senior officials
are entitled to receive multiples of their base salary and annual bonus.

These agreements could generate individual severance packages exceeding
$5 million apiece if the golden parachutes are ever exercised.

Ogden's golden parachute agreements were adopted without the prior approval
of shareholders, and we believe that shareholders should be able to vote on such
agreements in the future, as a means of assessing potential conflicts of
interest between executives and shareholders.

In our view, golden parachutes have the potential to create the wrong
incentives, reduce shareholder value and reward mismanagement. Change in control
concerns are more likely to occur if executives have managed the company in ways
that do not maximize shareholder value, and the

existence of golden parachutes can allow covered executives to walk away with
millions of dollars even if shareholder value has suffered during their tenure.

Shareholder value at Ogden has suffered in recent years. Although the last
year has seen a modest improvement, the fact remains that as of
mid-January 2001, Ogden's stock is still trading below levels seen five years
ago. During the same five year period, the stock has underperformed the S&P 500
and the MidCap 400 indices.

We believe that shareholders should have the opportunity to review Ogden
parachute arrangements in the future.

We Urge You To Vote FOR This Resolution

BOARD OF DIRECTORS' REASONS FOR OPPOSING THE PROPOSAL

The Board of Directors believes that agreements which provide compensation
to employees in the event of an acquisition of the Company (formerly known as
Ogden) are consistent with sound corporate governance and serve the best
interest of the shareholders. These agreements provide an incentive for
employees to remain with the Company in the face of real uncertainty about their
future careers and employment prospects that arises in connection with a
potential acquisition. Without these agreements, there would be a significant
risk that key employees would resign from the Company during negotiations for
the sale of the Company, which would potentially harm the shareholders by
reducing the price at which the Company could be sold or leaving the Company
without important management resources if the sale did not occur.

The Board of Directors further believes that change-of-control employment
agreements can be necessary to attract and retain top management talent. While
the Board of Directors does not currently expect that the Company will enter
into additional change-of-control employment agreements, this may change as
future circumstances dictate. In the event of any such change, the Board of
Directors expects to limit the amount of severance benefits in any such
employment agreement to not more than three years compensation. Requiring
shareholder approval of change-in-control agreements would hamper the Board's
flexibility to act promptly, decisively and with a competitive edge in
attracting and retaining top level management. Since very few of the Company's
competitors in the labor market require such approval and since these types of
agreements are very common, the Company would be at a distinct disadvantage in
management hiring.

For the reasons set forth above, the Board of Directors urges shareholders
to reject this proposal.

VOTE REQUIRED

The affirmative vote of the holders of a majority of the votes present at
this Annual Meeting in person or by proxy and entitled to vote will be required
to approve Proposal Number (3).

RECOMMENDATION

THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THE
FOREGOING SHAREHOLDER PROPOSAL NUMBER (3). PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS OTHERWISE SPECIFY IN THEIR
PROXIES.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of Covanta's Compensation Committee are Norman G. Einspruch,
Chairman; Judith D. Moyers; Homer A. Neal; and Robert R. Womack. All of the
foregoing members are "non-employee directors" (within the meaning of revised
Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange Act of
1934, as amended) and "outside directors" (within the meaning of Section 162(m)
of the Internal Revenue Code of 1986, as amended) of Covanta who are not
employees or members of management of Covanta or any of its subsidiaries.

The Compensation Committee Report on Executive Compensation and the graphs
which follow shall not be deemed to be incorporated by reference into any filing
made by Covanta under the Securities Act of 1933 or the Securities Exchange Act
of 1934, notwithstanding any general statement contained in any such filing
incorporating this proxy statement by reference, except to the extent Covanta
incorporates such report and graphs by specific reference.

COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION

THE EXECUTIVE COMPENSATION PROGRAM

PHILOSOPHY

The Company's Compensation Committee (the "Committee") of the Board of
Directors is responsible for developing the Company's executive compensation
philosophy. In addition, the Committee administers the compensation program with
respect to the Company's Chief Executive Officer ("CEO") and other senior
executive officers.

The primary goal of the Company's compensation philosophy is to establish
incentives that encourage and reward the creation of shareholder value. This
"pay-for-performance" principle permeates all elements of the Company's
compensation program, which is designed to align executives' financial interests
with those of our shareholders. The mix of direct compensation is being shifted
toward a greater emphasis on long-term performance. The Company seeks to reward
exceptional performers--those individuals whose job performance clearly exceeds
expectations and is consistent with the Company's financial goals and corporate
values.

The Committee retains outside compensation consultants to assist in
implementing the compensation philosophy and in periodically comparing the
Company's compensation levels with other similarly sized companies in the
markets in which it operates. These companies are included in the Standard &
Poors indices shown in the performance graphs.

To attract and retain high caliber executives, the Company targets its
executives' total compensation opportunity for superior performance at
approximately the 75th percentile of the competitive market. Actual compensation
levels may vary, depending upon individual performance, achievement of business
unit goals, the Company's results of operations and actual shareholder returns
realized. The primary elements of the Company's current compensation
arrangements are discussed below.

BASE SALARY

The Company targets base salary levels to attract, motivate and retain
talented executives who demonstrate the personal and professional qualities
required to succeed in the Company's entrepreneurial culture and who meet or
exceed our goals and standards for exceptional performance. As the Company
continues to increase its emphasis on long-term incentive compensation, it is
expected that while base salary will remain competitive, it will comprise a
smaller proportion of the total compensation received by our executive officers.

ANNUAL INCENTIVE

The Company's annual incentive bonus payments are designed to be highly
variable based on the achievement of relevant quantitative and qualitative
criteria established by the Committee, which may vary from year to year.
Historically, annual incentive awards have been based upon any or all of the
following elements: earnings-per-share, cash flow, business unit operating
income and attainment of team and individual goals. For 2000, based on the
changes in the nature of the Company's business, the Committee gave particular
consideration to the growth in the Company's energy earnings before interest and
taxes resulting from continuing operations (excluding the results of Ogden
Environmental and Energy Services, corporate overhead and interest on corporate
level debt) ("Energy EBIT") and extraordinary individual efforts in connection
with the sale of non-core businesses and the financial restructuring of the
Company. The Committee believes that annual incentive bonuses reinforce the
Company's pay-for-performance philosophy and it intends to continue rewarding
individuals whose performance contributes to the Company's achievement of its
strategic and financial objectives. To emphasize our commitment to linking
management incentives with shareholder value, a portion of annual incentive
awards attributable to 2000 performance were paid in the form of the Company's
restricted stock.

LONG-TERM INCENTIVES

The Committee believes that creation of shareholder value is best
facilitated through clear and uncomplicated long-term incentives. Accordingly,
the Company grants stock options on an annual basis to encourage equity
ownership and better align executives' and shareholders' interests. These grants
currently vest over a three-year period and are concentrated among those
executives who the Company believes have the greatest potential to substantially
increase shareholder value. The size of these annual grants reflects a variety
of factors, including corporate performance during the most recent fiscal year,
overall compensation levels for comparable positions in the competitive market,
consideration of a given individual's importance in implementing the Company's
long-term strategic plan and an evaluation of individual performance and
previous option grants.

CHIEF EXECUTIVE OFFICER (CEO) COMPENSATION

In assessing competitors' compensation levels and practices, the Committee
reviews data covering the industries within which the Company competes as well
as general industry data. Consistent with the Company's pay-for-performance
compensation philosophy and the desire to align Mr. Mackin's incentives with
those of the Company's shareholders, Mr. Mackin's base salary for 2000 was set
at $600,000 per annum and his target annual incentive bonus was set at 100% of
his base salary. Mr. Mackin did not receive an option grant in 2000 since he
received a front-loaded grant of 450,000 stock options in 1999.

The Executive Performance Incentive Plan ("EIP") adopted by the Committee
and the Board and approved by shareholders in 2000 sets forth a target bonus
payment that can be earned by Mr. Mackin based upon achievement of one or more
business criteria as designated by the Committee. For 2000, the Committee
designated that the maximum funding for the CEO award be equal to 2% of positive
Energy EBIT. The bonus actually earned by Mr. Mackin under the EIP was $650,000
in cash and $89,700 in the form of restricted stock.

It is anticipated that only Covanta's Chief Executive Officer will be
eligible to receive awards under the Executive Performance Incentive Plan for
the 2001 fiscal year. For 2001, the maximum bonus award that may be paid to
Mr. Mackin upon Covanta's achievement of the performance goals established by
the Committee shall once again be equal to 2% of Energy EBIT. The bonus actually
earned by Mr. Mackin will be based upon the achievement of other business
objectives at the sole discretion of the Committee.

POLICY REGARDING DEDUCTIBILITY OF EXECUTIVE COMPENSATION

The Company's policy regarding deductibility of executive pay in excess of
$1 million is to preserve the tax deductibility of such amounts by having annual
incentive bonuses for executives and stock options qualified as
performance-based compensation under the IRS rules. The EIP and the Company's
1999 Stock Incentive Plan, both of which were adopted by the Committee and the
Board, and approved by shareholders, constitute the largest elements of the
Company's senior executives' compensation packages. The Committee acknowledges
that there may be certain non-cash "imputed income" items and certain
non-incentive designed plans which may cause pay to exceed $1 million in any
year. This policy does not contemplate restricting the Committee from using
discretionary business judgment as it determines appropriate.

COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

Norman G. Einspruch--Chairman, Compensation Committee
Judith Davidson Moyers
Homer A. Neal
Robert R. Womack

The graph below compares the cumulative total shareholder return on
Covanta's Common Stock for the last five fiscal years with the cumulative total
shareholder return on the S&P 500 Index and the S&P Midcap 400 Index over the
same period, assuming the investment of $100 in Covanta Common Stock and the
reinvestment of all dividends.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
COVANTA ENERGY CORPORATION, S&P 500 AND S&P MIDCAP 400 INDEX

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Dollars

1995 1996 1997 1998 1999 2000

COVANTA ENERGY CORPORATION 100 94.59 148.17 138.19 67.4 86.81
S&P COMPOSITE 100 122.96 163.98 210.84 255.22 231.98
S&P MIDCAP 400 100 119.2 157.65 180.4 206.97 243.2

On September 17, 1999, the Company announced its intent to dispose of its
entertainment and aviation businesses and to concentrate on its remaining
business, energy, to eliminate its dividend and to replace its Chief Executive
Officer. On September 17, 1999, December 31, 1999, December 29, 2000 and
April 12, 2001, the closing prices for a share of the Company's Common Stock on
the New York Stock Exchange were $12.75, $11.9375, $15.375 and $16.56,
respectively. From January 1, 2000 to December 31, 2000, the cumulative total
return on the Company's Common Stock was 28.8%, on the S&P Midcap was 17.5% and
on the S&P 500 was -9%.

COMPARISON OF QUARTERLY CUMULATIVE TOTAL RETURN SINCE SEPTEMBER 17, 1999
COVANTA ENERGY CORPORATION, S&P 500 AND S&P MIDCAP 400 INDEX

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Dollars

9/17/99 12/31/99 3/31/00 6/30/00 9/30/00 12/31/00 3/31/01

COVANTA ENERGY CORPORATION 100 93.63 93.63 70.59 106.38 120.59 131.76
S&P COMPOSITE 100 114.88 117.51 114.39 113.28 104.42 104.42
S&P MIDCAP 400 100 117.19 132.05 127.7 143.21 137.7 137.7

- ------------------------

NOTES TO GRAPHS:

Assumes that the value of the investment in Covanta's Common Stock, and each
index, was $100 on December 31, 1995 and on September 17, 1999, respectively,
and that all dividends were reinvested.

EXECUTIVE COMPENSATION

The following Summary Compensation Table sets forth the aggregate cash and
non-cash compensation for each of the last three fiscal years awarded to, earned
by or paid to the CEO of Covanta and each of Covanta's five other most highly
compensated executive officers whose salary and bonus exceeded $100,000:

SUMMARY COMPENSATION TABLE(1)

ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------- --------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
COMPENSATION RESTRICTED OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (2) STOCK (4) LIMITED SARS (3)
- --------------------------- -------- -------- -------- ------------- ---------- ------------- ----------------

Scott G. Mackin,........... 2000 $600,000 $650,000 $ 0 $ 89,700 0 $ 0
President and Chief 1999 542,275 449,600 0 150,400 490,000 115,826
Executive Officer. 1998 517,275 575,000 0 0 0 97,019

Raymond E. Dombrowski, 2000 $300,000 $400,000 $ 0 $ 45,000 0 $ 6,660
Jr.,....................... 1999 300,000 300,000 0 0 0 2,667
Senior Vice President and 1998 132,869 110,000 0 0 50,000 0
Chief Financial Officer.*

Bruce W. Stone,............ 2000 $302,702 $240,000 $ 0 $ 60,000 0 $ 0
Executive Vice President 1999 291,059 172,425 0 57,575 55,000 54,168
and Chief Administrative 1998 281,216 225,000 0 0 0 49,562
Officer.

Lynde H. Coit,............. 2000 $290,000 $250,000 $ 0 $ 40,000 0 $ 6,535
Senior Vice President and 1999 290,000 250,000 11,500 0 0 6,400
General Counsel. 1998 270,000 210,000 0 0 0 46,720

Paul B. Clements,.......... 2000 $235,000 $195,000 $ 0 $ 45,000 0 $ 0
Senior Vice President-- 1999 220,000 138,750 0 46,250 50,000 40,956
Independent Power Plants. 1998 200,000 170,000 0 0 25,000 34,692

Jeffrey R. Horowitz,....... 2000 $209,796 $220,000 $ 0 $ 50,000 0 $ 0
Senior Vice President, 1999 200,000 112,500 0 37,500 50,000 36,590
Legal Affairs and 1998 192,120 145,000 0 0 20,000 34,616
Secretary.

- ------------------------------

* Mr. Dombrowski resigned his position on January 22, 2001. See "Employee
Contracts, Termination of Employment and Change in Control Arrangements"
below.

(1) Includes annual compensation awarded to, earned by or paid to the individual
during the last three fiscal years, or any portion thereof, that the named
individual served as an executive officer of Covanta.

(2) Amounts in this column represent cost of life insurance, car allowance,
medical reimbursement and other personal benefits which in the aggregate
exceeded the lesser of either $50,000 or 10% of the executive's combined
salary and bonus.

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

(FOOTNOTES CONTINUED FROM PRECEDING PAGE)

(3) Includes, for the fiscal year ending December 31, 2000: (i) contributions in
the amount of $9,868 credited to the account balances of each of
Messrs. Mackin, Stone, Horowitz and Clements under the Company's Profit
Sharing Plan; (ii) a special discretionary cash payment made to
Messrs. Mackin, Stone, Horowitz and Clements in the amount of $105,958,
$44,300, $26,722 and $31,088, respectively; and (iii) matching contributions
in the amount of $6,535 and $6,660 were credited to the account balances of
Messrs. Coit and Dombrowski, respectively, under the Covanta 401(k) Plan.

(4) Awards of restricted stock are based on the price of Covanta Common Stock on
the date of award and vest at the rate of 50% each year over a period of two
years from the date of award.

COVANTA ENERGY GROUP PENSION PLAN

Scott G. Mackin, Jeffrey R. Horowitz, Paul B. Clements and Bruce W. Stone
participate in the Company's Energy Group Pension Plan, a tax-qualified defined
benefit plan subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended. Under the Energy Group Pension Plan each
participant who meets the plan's vesting requirements will be provided with an
annual benefit at or after age 65 equal to 1.5% of the participant's average
compensation during the five consecutive calendar years of employment out of the
ten consecutive calendar years immediately preceding his retirement date or
termination date during which such average is the highest, multiplied by his
total years of service. Compensation includes salary and other compensation
received during the year and deferred income earned, but does not include
imputed income, severance pay, special discretionary cash payments or other
non-cash compensation. The relationship of the covered compensation to the
annual compensation shown in the Summary Compensation Table would be the Salary
and Bonus columns and any car allowance. A plan participant who is at least age
55 and who retires after completion of at least five years of employment
receives a benefit equal to the amount he would have received if he had retired
at age 65, reduced by an amount equal to 0.5% of the benefit multiplied by the
number of months between the date the participant commences receiving benefits
and the date he would have commenced to receive benefits if he had not retired
prior to age 65.

Messrs. Mackin, Horowitz, Clements and Stone also participate in the
Company's Energy Group Supplemental Deferred Benefit Plan, a deferred
compensation plan which is not qualified for federal income tax purposes. The
Energy Group Supplemental Benefit Plan provides that, in the event that the
annual retirement benefit of any participant in the Energy Group Pension Plan,
determined pursuant to such plan's benefit formula, cannot be paid because of
certain limits on annual benefits and contributions imposed by the Code, the
amount by which such benefit must be reduced will be paid to the participant
from the general assets of the Company.

The following table shows the estimated annual retirement benefits payable
in the form of a life annuity at age 65 under the Energy Group Pension Plan and
the Energy Group Supplemental Benefit Plan. Mr. Mackin has 14.5 years,
Mr. Stone has 24.8 years, Mr. Horowitz has 9.5 years and Mr. Clements has
7.1 years of credited service under the Energy Group Pension Plan as of
December 31, 2000 and had annual average earnings for the last five years of
$982,455, $489,544, $321,720 and $323,373 respectively.

AVERAGE ANNUAL
EARNINGS IN 5
CONSECUTIVE
HIGHEST PAID
YEARS OUT OF
LAST 10 YEARS ESTIMATED ANNUAL RETIREMENT BENEFITS BASED ON YEARS OF SERVICE
PRECEDING ---------------------------------------------------------------
RETIREMENT 5 10 15 20 25 30
- --------------------- -------- -------- -------- -------- -------- --------

$ 320,000 $24,000 $ 48,000 $ 72,000 $ 96,000 $120,000 $144,000
340,000 25,500 51,000 76,500 102,000 127,500 153,000
360,000 27,000 54,000 81,000 108,000 135,000 162,000
375,000 28,125 56,250 84,375 112,500 140,625 168,750
400,000 30,000 60,000 90,000 120,000 150,000 180,000
425,000 31,875 63,750 95,625 127,500 159,375 191,250
450,000 33,750 67,500 101,250 135,000 168,750 202,500
500,000 37,500 75,000 112,500 150,000 187,500 225,000
550,000 41,250 82,500 123,750 165,000 205,250 247,500
600,000 45,000 90,000 135,000 180,000 225,000 270,000
625,000 46,875 93,750 140,625 187,500 234,375 281,250
900,000 67,500 135,000 202,500 270,000 337,500 405,000
950,000 71,250 142,500 213,750 285,000 356,250 427,500
1,000,000 75,000 150,000 225,000 300,000 375,000 450,000

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS

EMPLOYMENT CONTRACTS

(A) Mr. Mackin is employed by Covanta as its President and Chief Executive
Officer, pursuant to an employment agreement dated as of October 1, 1998 for
a five year term commencing October 1, 1998 and continuing through
September 30, 2003 and year to year thereafter, subject to the right of
either party to terminate the agreement on any September 30 upon at least
sixty (60) days prior written notice. The agreement provides for a minimum
annual salary in the amount of $517,275,

and an annual incentive bonus in such amount as may be determined by the
Board of Directors. The agreement also provides that if Mr. Mackin
terminates his employment for good reason, including a change in control (as
defined in the agreement), or if his employment is terminated by Covanta for
any reason other than for cause (as defined in the agreement) then he is
entitled to a lump sum cash payment equal to the product of five times his
base salary at the highest annual rate in effect at any time prior to the
termination date, and the highest amount of annual bonus payable at any time
prior to the termination date and, if applicable, an additional payment
equal to the amount of any excise tax imposed on any payments under the
agreement (including the additional payment) under the excess parachute
payments of the Code.

(B) Mr. Stone is employed by Covanta as its Executive Vice President and Chief
Administrative Officer pursuant to an employment agreement which continues
through May 1, 2004, and from year to year thereafter. The annual salary
under the agreement is fixed at a minimum of $291,059 with an annual
incentive bonus in such amount as determined by the Board of Directors. The
agreement also provides that if Mr. Stone's employment is terminated by
Covanta Energy for any reason other than for cause (as defined in the
agreement) or if Mr. Stone terminates employment for good reason, including
a change in control (as defined in the agreement), then Mr. Stone is
entitled to a lump sum cash payment equal to the product of five time his
annualized base salary at the highest annual rate in effect at any time
prior to the termination date and the highest amount of annual bonus payable
at any time prior to the termination date.

(C) Mr. Coit is employed by Covanta as its Senior Vice President and General
Counsel pursuant to an employment agreement dated as of March 1, 1999 which
continues in effect until terminated by Mr. Coit, by Covanta or by
Mr. Coit's death or total disability. The annual salary under the agreement
is fixed at a minimum of $290,000 with an annual incentive bonus in such
amount as determined by the Board of Directors. The agreement also provides
that if Mr. Coit's employment is terminated by Covanta for any reason other
than for cause (as defined in the agreement) or if Mr. Coit terminates
employment for good reason, including a change in control (as defined in the
Agreement), then Mr. Coit is entitled to a lump sum cash payment equal to
the product of five times his base salary at the highest annual rate in
effect at any time prior to the termination date and the highest amount of
annual bonus payable at any time prior to the termination date.

(D) Mr. Horowitz is employed by Covanta as its Senior Vice President, Legal
Affairs and Secretary, pursuant to an employment agreement effective May 1,
1999 and continuing until May 1, 2004 and thereafter from year to year. The
annual salary under the agreement is fixed at a minimum of $201,721 with an
annual incentive bonus in such amount as determined by the Board of
Directors. The Agreement also provides that if Mr. Horowitz' employment is
terminated for any reason other

than for cause (as defined in the agreement) or if Mr. Horowitz terminates
employment for good reason, including a change in control (as defined in the
agreement), then Mr. Horowitz would be entitled to a lump sum cash payment
equal to the product of five times his annualized base salary at the highest
annual rate in effect at any time prior to the termination date and the
highest amount of annual bonus payable at any time prior to the termination
date.

(E) Mr. Clements is employed by Covanta as its Senior Vice President,
Independent Power Projects, pursuant to an employment agreement effective
May 1, 1999 and continuing until May 1, 2004 and thereafter from year to
year. The annual salary under the agreement is fixed at a minimum of
$220,000 with an annual incentive bonus in such amount as determined by the
Board of Directors. The Agreement also provides that if Mr. Clements'
employment is terminated for any reason other than for cause (as defined in
the agreement) or if Mr. Clements terminates employment for good reason,
including a change-in-control (as defined in the agreement), then
Mr. Clements would be entitled to a lump sum cash payment equal to the
product of five times his annualized base salary at the highest annual rate
in effect at any time prior to the termination date and the highest amount
of annual bonus payable at any time prior to the termination date.

TERMINATION OF EMPLOYMENT ARRANGEMENTS

Mr. Dombrowski is employed by Covanta as Director of Restructuring
Activities pursuant to a letter agreement effective as of January 22, 2001,
which will continue through July 22, 2001. Pursuant to the letter agreement:
(i) Mr. Dombrowski's then existing employment agreement was terminated as of
January 22, 2001; (ii) commencing February 1, 2001, he will receive a cash
payment equal to the product of five times his base salary ($300,000) and his
bonus ($400,000) payable monthly in 12 equal monthly installments; (iii) any
excise tax imposed under the excess parachute section of the Internal Revenue
Code as a result of the foregoing payments will be paid by Covanta; (iv) he will
receive a cash payment equal to $45,000 in respect of accrued and unused
vacation pay for the past two years; (v) during the six month period he will
perform such duties as assigned to him by Covanta's President and Chief
Executive Officer and will receive a monthly salary of $50,000 and an additional
amount based on a formula using the average closing price of Covanta's stock for
the last ten trading days prior to July 31, 2001, payable in cash or stock at
Covanta's option; and (vi) he will receive an award of 15,000 shares of Covanta
restricted stock which vests on July 31, 2001. If Covanta terminates the letter
agreement for cause, his rights with respect to (v) above shall terminate.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

A loan was made by Covanta in 1989 to Lynde H. Coit, Senior Vice President
and General Counsel of Covanta, to assist Mr. Coit in the purchase of a home in
connection with his relocation. The loan is evidenced by a demand note, bearing
interest at the rate of 8% per annum and is secured by a second mortgage on the
premises. The maximum amount outstanding under the loan during 2000 was
$145,000. As of December 31, 2000, there was an outstanding balance of $145,000.

A loan was made by Covanta on December 16, 1998 to David L. Hahn, Senior
Vice President, Aviation to assist Mr. Hahn in making improvements and additions
to his existing home. The loan is evidenced by a promissory note bearing
interest at the rate of 7% per annum. The maximum amount outstanding during 2000
under the promissory note was $344,942. As of December 31, 2000, there was an
outstanding balance of $300,000 plus $44,942 of accrued interest, under the
promissory note.

The maximum amount outstanding during 2000 pursuant to a loan made by
Covanta Energy in 1990 to Bruce W. Stone, an Executive Officer of Covanta, for
the purpose of assisting him in the purchase of his home was $99,593. The loan
is evidenced by a demand note bearing interest at the rate 8% per annum. As of
December 31, 2000, there was an outstanding balance of $82,304, including
accrued interest.

On August 6, 1999, Covanta made loans to Messrs. Mackin, Stone and Coit for
the purpose of paying the exercise price and withholding taxes in connection
with their exercise of Covanta stock options which were expiring on August 9,
1999. All loans are evidenced by demand notes with interest accruing thereon at
the short-term applicable federal rate compounded annually. As of December 31,
2000 the outstanding balances for Messrs. Mackin, Stone and Coit were $549,848,
$473,958 and $106,864, respectively, including accrued interest.

Robert E. Smith, a Covanta director, is counsel to the law firm of
Rosenman & Colin LLP which during 2000 rendered legal services to Covanta
principally in the area of litigation management.

Mr. Tato, a Covanta director, is a member of the law firm of LeBoeuf, Lamb,
Greene & MacRae, LLP which rendered services during 2000 to Covanta Energy
Group, Inc., a Covanta subsidiary.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires Covanta's
directors, officers and persons who beneficially own more than 10% of any class
of Covanta's equity securities to file certain reports concerning their
beneficial ownership and changes in their beneficial ownership of Covanta's
equity securities. Covanta believes that during fiscal 2000 all persons who are
required to file reports

concerning their beneficial ownership as described above complied with their
Section 16(a) filing requirements.

AUDIT COMMITTEE REPORT

Covanta's Audit Committee (the "Committee") operates under a formal, written
Audit Committee Charter which was approved and adopted by the Board of
Directors, a copy of which is attached to this Proxy Statement as Schedule A.

Management is responsible for Covanta's internal controls and the financial
reporting process. Covanta's independent accountants are responsible for
performing an independent audit of Covanta's consolidated financial statements
in accordance with generally accepted auditing standards and to issue a report
thereon. The Committee's responsibility is to monitor and oversee these
processes.

The Committee reviewed and discussed the audited financial statements of
Covanta for the fiscal year ended December 31, 2000 with Covanta's management
and management represented to the Committee that Covanta's financial statements
were prepared in accordance with Generally Accepted Accounting Principles. The
Committee discussed with Deloitte & Touche LLP, Covanta's independent auditors,
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). The Committee also received the written
disclosures and the letter from Deloitte & Touche LLP required by Independence
Standards Board Standard No. 1 (Independence Discussion with Audit Committees),
and the Committee discussed with Deloitte & Touche LLP their independence from
Covanta and determined that the services provided by Deloitte & Touche LLP are
compatible with maintaining their independence.

Based on the Committee's discussions with management and Deloitte & Touche
LLP and the committee's review of the representation of management and the
report of the independent accountants to the Committee, the Committee
recommended to the Board of Directors that Covanta's audited financial
statements be included in Covanta's Annual Report on Form 10-K for the fiscal
year ended December 31, 2000 for filing with the Securities and Exchange
Commission.

AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

Jeffrey F. Friedman--Chairman, Audit Committee
Anthony J. Bolland
Robert E. Smith
Robert R. Womack

AUDIT FEES

The aggregate fees billed by Deloitte & Touche LLP for professional services
rendered for the audit of the Company's annual financial statements and the
review of the financial statements included in the Company's quarterly reports
on Form 10-Q for the year 2000 was $1,699,000.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

Covanta did not engage Deloitte & Touche LLP to provide services to Covanta
regarding financial information systems design and implementation during 2000.

ALL OTHER FEES

The aggregate fees billed for services rendered by Deloitte & Touche LLP,
other than the services described above, during the year 2000 was $8,172,000.

LEGAL PROCEEDINGS

(a) Shareholder Litigation

As previously reported, certain complaints denominated as class actions (the
"Actions") were filed during 1999 in the United States District Court for the
Southern District of New York against the Company and certain of its former
executive officers. On April 28, 2000, all defendants filed a motion to dismiss
the Actions, with prejudice. On October 4, 2000, the Court issued a decision
granting the defendants' motion in full, and dismissing the Actions with
prejudice. A judgment to that effect was entered on October 9, 2000.

(b) Other Litigation

As previously reported, during 1999, the Company received a summons and
complaint filed in the Supreme Court of the State of New York, brought by R.
Richard Ablon, the Company's former Chairman, President and Chief Executive
Officer. In December 1999, a settlement was reached wherein, among other terms,
Mr. Ablon agreed to withdraw his lawsuit by stipulation and without prejudice
pending the payment of certain amounts on or before July 3, 2000, whereupon the
withdrawal will automatically become a withdrawal with prejudice. All payments
have been made as required under the settlement by July 3, 2000 and the lawsuit
has been withdrawn with prejudice.

OTHER MATTERS

Covanta has no knowledge of any matters to be presented to the meeting other
than those set forth above. The persons named in the accompanying form of proxy
will use their own discretion in voting with respect to any such matters.

Any proposals of shareholders to be presented at Covanta's Annual Meeting of
Shareholders in 2002 must be received at Covanta's principal executive offices,
40 Lane Road, Fairfield, New Jersey 07004, Attn: Secretary, not later than
January 15, 2002.

HOW TO RECEIVE YOUR ANNUAL REPORT AND PROXY STATEMENT ON-LINE

Save Covanta Energy Corporation future postage and printing expense by
consenting to receive future annual reports and proxy statements on-line on the
Internet.

Most shareholders can elect to view future proxy statements and annual
reports over the Internet instead of receiving paper copies in the mail. Those
shareholders will be given the opportunity to consent to future Internet
delivery when they vote their proxy. (For some shareholders, this option is only
available if you vote by Internet.)

If you are not given an opportunity to consent to Internet delivery when you
vote your proxy, contact the bank, broker or other holder of record through
which you hold your shares and inquire about the availability of such an option
for you.

If you consent, your account will be so noted and, when Covanta's 2001
Annual Report and the Proxy Statement for the 2002 Annual Meeting of
Shareholders become available, you will be notified on how to access them on the
Internet. Any prior consent you have given will remain in effect until
specifically revoked by you in the manner specified by the bank or broker that
manages your account.

If you do elect to receive your Covanta materials via the Internet, you can
still request paper copies by contacting the Assistant Secretary at Covanta
Energy Corporation, Two Pennsylvania Plaza, New York, NY 10121.

SCHEDULE A
COVANTA ENERGY CORPORATION
AUDIT COMMITTEE CHARTER

This Audit Committee Charter ("Charter") has been adopted pursuant to the
Covanta Corporation Board of Directors Policies on Corporate Governance adopted
by the Board of Directors (the "Board") of Covanta Energy Corporation (the
"Company"). The Audit Committee of the Board (the "Committee") shall review and
reassess this charter annually and recommend any proposed changes to the Board
for approval.

ROLE AND INDEPENDENCE: ORGANIZATION

The Committee assists the Board in fulfilling its responsibility for
oversight of the quality and integrity of the accounting, auditing, internal
control and financial reporting practices of the Company. It may also have such
other duties as may from time to time be assigned to it by the Board. The
membership of the Committee shall consist of at least three directors, who are
each free of any relationship that, in the opinion of the Board, may interfere
with such member's individual exercise of independent judgment. Each Committee
member shall also meet the independence and financial literacy requirements for
serving on audit committees, and at least one member shall have accounting or
related financial management expertise, all as set forth in the applicable rules
of the New York Stock Exchange. The Committee shall maintain free and open
communication with the independent auditors, the internal auditors and Company
management. In discharging its oversight role, the Committee is empowered to
investigate any matter relating to the Company's accounting, auditing, internal
control or financial reporting practices brought to its attention, with full
access to all Company books, records, facilities and personnel. The Committee
may retain outside counsel, auditors or other advisors.

One member of the Committee shall be appointed as chair. The chair shall be
responsible for leadership of the Committee, including scheduling and presiding
over meetings, preparing agendas, and making regular reports to the Board. The
chair will also maintain regular liaison with the Chairman of the Board, CEO,
CFO, the lead independent audit partner and the director of internal audit.

The Committee shall meet at least four times a year, or more frequently as
the Committee or the Chairman of the Board considers necessary. At least once
each year the Committee shall have separate private meetings with the
independent auditors, management and the internal auditors. The Committee shall
have an opportunity to meet with the independent auditors in executive session
at each meeting.

RESPONSIBILITIES

Although the Committee may wish to consider other duties from time to time,
the general recurring activities of the Committee in carrying out its oversight
role are described below. The Committee shall be responsible for:

- Recommending to the Board the independent auditors to be nominated for
shareholder approval to audit the financial statements of the Company.
Such auditors are ultimately accountable to the Board and the Committee,
as representatives of the shareholders.

- Evaluating, together with the Board and management, the performance of the
independent auditors and, where appropriate, replacing such auditors.

- Obtaining annually from the independent auditors a formal written
statement describing all relationships between the auditors and the
Company, consistent with Independence Standards Board Standard Number 1.
The Committee shall actively engage in a dialogue with the independent
auditors with respect to any relationships that may impact the objectivity
and independence of the auditors and shall take, or recommend that the
Board take, appropriate actions to oversee and satisfy itself as to the
auditors' independence.

- Reviewing the audited financial statements and discussing them with
management and the independent auditors. These discussions shall include
the matters required to be discussed under Statement of Auditing Standards
No. 61 and consideration of the quality of the Company's accounting
principles as applied in its financial reporting, including a review of
particularly sensitive accounting estimates, reserves and accruals,
judgmental areas, audit adjustments (whether or not recorded), and other
such inquiries as the Committee or the independent auditors shall deem
appropriate. Based on such review, the Committee shall make its
recommendation to the Board as to the approval of the Company's audited
financial statements.

- Issuing annually a report to be included in the Company's proxy statement
as required by the rules of the Securities and Exchange Commission.

- Overseeing the relationship with the independent auditors, including
discussing with the auditors the nature and rigor of the audit process,
receiving and reviewing audit reports, and providing the auditors full
access to the Committee (and the Board) to report on any and all
appropriate matters.

- Discussing with a representative of management and the independent
auditors: (1) the interim financial information contained in the Company's
Quarterly Report on Form 10-Q prior to its

filing, (2) the earnings announcement prior to its release (if
practicable), and (3) the results of the review of such information by the
independent auditors.

- Overseeing internal audit activities, including discussing with management
and the internal auditors the internal audit function's organization,
objectivity, responsibilities, plans, results, budget and staffing.

- Discussing with management, the internal auditors and the independent
auditors the quality and adequacy of and compliance with the Company's
internal controls.

- Discussing with management and/or the Company's general counsel any legal
matters (including the status of pending litigation) that may have a
material impact on the Company's financial statements, and any material
reports or inquiries from regulatory or governmental agencies.

- Approving the budgeted compensation for external audit services as
recommended by the CFO.

- Nominating the Chief Accounting Officer to the Chairman of the Board.

- Discussing with the independent auditors the audit plan, changes from the
audit plan and any serious difficulties or differences in opinion with
management encountered during the audit.

- Discussing with the Chief Accounting Officer significant findings during
the year and management's responses, any difficulties encountered in the
course of audits, including any restrictions on the scope of work or
access to required information and any changes to the plan for Internal
Audit.

- Reviewing in summary form the business expenses incurred by members of the
Board of Directors and the CEO.

- Submitting a report of the results of its activities to the Board of
Directors at least annually.

The Committee's job is one of oversight. Management is responsible for the
preparation of the Company's financial statements and the independent auditors
are responsible for auditing those financial statements. The Committee and the
Board recognize that management (including the internal audit staff) and the
independent auditors have more resources and time, and more detailed knowledge
and information regarding the Company's accounting, auditing, internal control
and financial reporting practices than the Committee does; accordingly the
Committee's oversight role does not provide any expert or special assurance as
to the financial statements and other financial information provided by the
Company to its shareholders and others.

-----------------------

[LOGO]

2001

NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT

. . . . . . . . . . . . . . . . . . . . . . . . . .

THE ANNUAL MEETING OF
SHAREHOLDERS WILL BE HELD
AT THE
ESSEX HOUSE HOTEL,
160 CENTRAL PARK SOUTH,
NEW YORK, NEW YORK AT
9:30 A.M. (EASTERN
DAYLIGHT
SAVINGS TIME)
ON WEDNESDAY, MAY 23,
2001.

- --------------------------------------------------------------------------------

VOTE BY TELEPHONE OR INTERNET
24 HOURS A DAY,7 DAYS A WEEK

TELEPHONE INTERNET MAIL
800-648-2104 HTTP://PROXY.SHAREHOLDER.COM/COV

Use any touch-tone Use the Internet to vote Mark,sign and date your
telephone to vote your your proxy. Have your proxy card and return
proxy.Have your proxy proxy card in hand when it in the postage-paid
card in hand when you you access the envelope we have
call.You will be website.You will be provided.
prompted to enter your prompted to enter your
control number,located control number,located
in the box below,and in the box below,to
then follow the simple create an electronic
directions. ballot.

Your telephone or Internet vote -------------------------------------
authorizes the named proxies to vote If you have submitted your proxy by
your shares in the same manner as if telephone or the Internet there is no
you marked,signed and returned the need for you to mail back your proxy.
proxy card. -------------------------------------

----------------------------

CALL TOLL-FREE TO VOTE o IT'S FAST AND CONVENIENT CONTROL NUMBER FOR
- ------------------------------------------------- TELEPHONE OR INTERNET VOTING
800-648-2104 ----------------------------
- --------------------------------------------------

v DETACH PROXY CARD HERE IF YOU ARE NOT v
VOTING BY TELEPHONE OR INTERNET
- --------------------------------------------------------------------------------

The proposals are fully explained in the enclosed Notice of Annual Meeting of
Shareholders and Proxy Statement. To vote your proxy please mark by placing an
"X" in the appropriate box, sign and date the Proxy.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE FOUR
DIRECTORS, "FOR" PROPOSAL 2 AND "AGAINST" PROPOSAL 3.

Proposal 1. Election of the following four nominee directors for a three year
term.

FOR election |_| WITHHOLD AUTHORITY |_| *EXCEPTIONS |_|
of all nominees to vote for all
listed below nominees listed below.

Nominees: 01 - Scott G. Mackin, 02 - Anthony J. Bolland, 03 - Craig
G. Matthews, 04 - Robert E. Smith

(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN
THE SPACE PROVIDED BELOW.)

*Exceptions ____________________________________________________________________

Proposal 2. Ratification of Proposal 3. Shareholder proposal
appointment of Deloitte & urging the board of
Touche LLP as auditors of directors to obtain prior
Covanta for the year 2001. shareholder approval for
all future agreements that
provide compensation for
senior executives if there
is a change in control of
the company.

FOR |_| AGAINST |_| ABSTAIN |_| FOR |_| AGAINST |_| ABSTAIN |_|

Check here if you
Consent to future electronic delivery of |_|
annual report/proxy statement (see
explanation on the last page of the
proxy statement)

Discontinue mailing of annual report |_|
only

Attend annual meeting |_|

Dated __________________________________, 2001

______________________________________________
Signature

______________________________________________
Signature, if held jointly

SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.

IF YOU PLAN TO ATTEND THE MEETING PLEASE CHECK HERE. |_|

VOTES MUST BE INDICATED IN BLACK OR BLUE INK. |X|

- --------------------------------------------------------------------------------

PLEASE DETACH HERE

^ YOU MUST DETACH THIS PORTION OF THE PROXY CARD ^
BEFORE RETURNING IT IN THE ENCLOSED ENVELOPE

- --------------------------------------------------------------------------------

PREFERRED

COVANTA ENERGY CORPORATION -BOARD OF DIRECTORS PROXY

KNOW ALL MEN BY THESE PRESENT that the undersigned shareholder of COVANTA
ENERGY CORPORATION (the "Corporation ")does hereby constitute and appoint Scott
G.Mackin and Jeffrey R.Horowitz,and each of them attorneys and proxies for the
undersigned with full power of substitution to each,for and in the name of the
undersigned and with all the powers the undersigned would possess if personally
present,to appear and vote all the shares of Preferred Stock f the undersigned
in the Corporation at the Annual Meeting of Shareholders of the Corporation,to
be held at the Essex House Hotel,160 Central Park South,New York,New York on
Wednesday,May 23,2001,at 9:30 A.M.(Eastern Daylight Savings Time)and at any and
all adjournments or postponements thereof,as set forth in the Notice of Annual
Meeting of Shareholders and in their discretion to act upon any other matters as
may properly come before the meeting.

A majority of such attorneys as shall be present and shall act at said
meeting,or any of them (or if only one of such attorneys shall be present and
acts,then that one)shall have and may exercise all the powers of said attorneys
hereunder.

IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED,THE SHARES TO WHICH IT
RELATES WILL BE VOTED AS SPECIFIED,BUT IF NO SPECIFICATION IS MADE,THE SHARES TO
WHICH IT RELATES WILL BE VOTED FOR THE ELECTION OF THE FOUR NOMINEE DIRECTORS
LISTED ON THE REVERSE SIDE;FOR THE RATIFICATION OF DELOITTE &TOUCHE LLP AS
AUDITORS;AND AGAINST SHAREHOLDER PROPOSAL NUMBER 3 .THE BOARD OF DIRECTORS
RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF THE FOUR DIRECTORS;FOR
RATIFICATION OF DELOITTE &TOUCHE LLP AS AUDITORS;AND AGAINST SHAREHOLDER
PROPOSAL NUMBER 3.

(Continued and to be dated and signed on the reverse side)

COVANTA ENERGY CORPORATION
P.O. BOX 11172
NEW YORK, N.Y. 10203-0172