The World Bank’s Board of Executive Directors on Tuesday approved a loan of US$80 million to help China increase the development and utilization of coal bed methane (CBM) and coal mine methane (CMM) as substitutes to coal to meet the country’s growing demand for energy and reduce greenhouse gases and local air pollutants associated with coal combustion.

China’s rising energy demand has been met largely by domestic coal, which accounted for about 69 percent of China’s total energy consumption in 2007. The fast increase in coal production and consumption has contributed to China’s severe air pollution and rapid rise in the emission of greenhouse gases. Particularly, the direct combustion of coal by industries and households at or near ground level to meet fuel and heating needs is the main culprit for the poor air quality in most Chinese cities.

The production of coal results in the emission of methane (CH4) as a greenhouse gas (GHG) into the atmosphere, which is approximately 21 times more potent as a GHG than carbon dioxide (CO2). On the other hand, methane is a high quality and clean energy which can be recovered either during mining operations or ahead of mining activities and utilized as a clean fuel by households, commercial and industrial establishment or for power generation.

As part of the overall government efforts to promote cleaner energy resources, improve the safety of mining operations and help achieve significant reductions in GHG emissions, the Government of China plans to increase significantly the development and utilization of CBM/CMM resources.

The Shanxi Coal Bed Methane Development and Utilization Project will focus on Shanxi Province which produces one quarter of China’s coal production of 2.6 billion tons and hosts one-third of the estimated 32 trillion cubic meter (TCM) CBM resource in China.

The project will assist the Shanxi Provincial Government in furthering the development and implementation of an integrated CBM/CMM development plan and policy framework, and in helping bridge existing shortfalls in knowledge and skill through strengthening institutional capacity so as to foster a sustainable CBM/CMM industry in the province. It will finance the exploration and development of about 350 vertical CBM production wells with an estimated annual production capacity of 250 million Nm3 as well as the construction of a LNG plant consisting of four modular with individual production capacity of 50,000 tons/year for an ultimate production capacity of 200,000 tons/year. The LNG produced will be sold to households and industrial and commercial users in towns and cities in Shanxi and other provinces.

China’s energy and environmental sustainability is one of the priorities in the Bank’s program in China. As part of the Bank’s overall efforts to promote the CBM/CMM industry development in China, the Bank has supported the efforts of Central Government of China to develop a comprehensive set of institutional and policy initiatives. The Bank has also supported the world’s largest CMM capture and utilization project in Shanxi Province to help reduce greenhouse gas emissions through carbon finance.

(China Development Gateway May 20, 2009)