The best choice for cat waste is a natural kitty litter. There are many options - some made of pine chips, newspaper, corn, and wheat. Treehugger highlights Swheat Scoop as a good "green" litter, and readers share other options in the comments.
Clay litters are bad news all around because they must be strip-mined, which is bad for the environment, and it later ends up in the landfill. Plus, the dust is bad for kitty, and you.
Over 2 million tons of non-biodegradable cat litter made from clay that is mined ends up in municipal landfills each year.Thurston County, WA is concerned with pet waste, and gives suggestions for disposal. One suggestion is to flush dog and cat waste down the toilet. There has been some confusion about toxic cat waste, and whether flushing is a good solution. Do not flush if you buy clay litter. It must be flushable. If so, it is perfectly safe to flush. Some people even train their cats to use the toilet. The concern with cat waste is from feral cats who relieve themselves outside, which will seep into ground water and sewer water.
Here are some other ways to "green" your pets. Some people are actually converting cow poop into energy, which can power an entire farm!