The study tackled the pressing environmental issue of managing both biodegradable and non-biodegradable household plastic waste, aiming to convert this waste into valuable hydrocarbons, thus addressing critical concerns over plastic pollution and the quest for renewable energy sources. In the context of escalating environmental degradation and the urgent need for sustainable alternatives to fossil fuels, the ability to transform various forms of waste into energy presents a significant stride towards ecological and energy sustainability. Utilizing an innovative methodology, the research employed catalytic degradation of mixed plastic waste, leveraging fly ash as a catalyst and biogas produced from a combination of cow dung and kitchen waste as a renewable and sustainable heat source. This process was fine-tuned across several catalyst-to-polymer (cat/pol) ratios, specifically 0.10, 0.15, and 0.20, with detailed documentation of the degradation temperatures and yields of liquid and gaseous hydrocarbons for each 1 kg batch of plastic waste. Notably, at a cat/pol ratio of 0.20, a remarkable 100% conversion rate was achieved, highlighting the efficiency of this method. Following this, the resultant oil was segmented based on boiling points for further analysis and evaluation of its utility as a diesel fuel substitute. Significant findings include the highest liquid hydrocarbon yield of 65.1% at 378 °C, achieved with the 0.20 cat/pol ratio. Moreover, fractions boiling above 100 °C were identified to possess superior heating values and cetane numbers compared to conventional diesel, particularly the fraction boiling at 100 °C–150 °C (C2), which demonstrated optimal performance and combustion qualities. This fraction achieved a maximum brake thermal efficiency of 32.92%, exhibited low smoke density and hydrocarbon emissions of 48 HSU and 32ppm, but it also resulted in a significant increase in NOx emission. Among all the fractions, diesel C2 was observed to be the best in terms of performance & combustion and was lower in emission. The conclusions drawn underscore the method’s potential to mitigate plastic pollution and reduce fossil fuel reliance by converting both biodegradable and non-biodegradable waste into useful energy. This study’s novelty lies in its comprehensive approach to waste management and energy recovery, significantly advancing over previous literature by achieving a 100% conversion rate at a specific cat/pol ratio and optimizing the output for use as a diesel alternative. It stands out by producing a fraction with both high efficiency and lower emissions, offering a scalable, sustainable solution to waste management challenges and paving the way for future innovations in sustainable energy production.