That is already a thing, and it's being expanded. The Stockholm municipal energy company is already operating what they claim to be the world's largest heat pum

That is already a thing, and it's being expanded. The Stockholm municipal energy company is already operating what they claim to be the world's largest heat pump facility with a capacity to extract 225 MW of heat from treated wastewater. It first opened in 1986 and has been incrementally expanded over the years. Both the hot and the cold sides of the heat pumps are used; the cold side goes into the district cooling system and is used in e.g. datacenters. Still, this facility has both heat pumps, biofuel furnaces, and as a backup for the rare extremely cold days, resistive water heaters. It should also be mentioned that Swedish electricity generation is effectively 100% renewable already; it's mainly wind, hydro and nuclear. The co-generation plants mainly produce heating and only a small amount of electricity, more or less as a byproduct. Waste incineration has a more or less negligible carbon footprint if you look at the big picture.