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The proposed blue-bag recycling system for Chicago came one step closer to becoming a reality Tuesday when it was approved by a City Council committee.

By a 2-1 vote, the council`s Energy and Environment Committee endorsed the city`s 20-year plan for recycling and garbage disposal, which calls for blue-bag recycling and a $51 million rehabilitation of the city`s incinerator on the West Side.

In more than five hours of testimony, city officials made their pitch for the controversial recycling method, in which blue plastic bags of recyclables will be collected with household trash and separated later, and environmentalists argued that the recyclables will be contaminated with garbage.

”Curbside suburban-style recycling has proven extremely expensive,”

said Streets and Sanitation Commissioner Raymond Cachares.

Kevin Greene, a member of the Chicago Recycling Coalition, which has led opposition to the city`s recycling plan, said the system has not been adequately tested.

Ald. Edwin Eisendrath (43rd), chairman of the Environment Committee, said the blue bags he saw at a pilot run of the program on the Southwest Side were intact after being compressed in a city garbage truck.

Ald. Joe Moore (49th), who voted against the solid-waste plan, said he would have preferred more testing of the blue-bag system.