In order to meet the rising demand for energy, China has quickened its pace in developing coalbed methane (CBM), a clean fuel.

CBM is more commonly known as coalmine gas. With components similar to natural gas, it is a practical and reliable alternative energy source, said Sun Maoyuan, president of China United Coalbed Methane Co Ltd.

"Last year our company drilled 391 CBM wells in the nation," he said. "And we achieved the production capacity of 200 million cubic meters. This year we aim to drill more than 400 wells and increase our production capacity to 450 million cubic meters."

China started to develop CBM in the 1990s. Established in 1996, China United Coalbed Methane has exclusive rights to form Sino-foreign cooperation to explore, develop and produce CBM in the country.

Last year, the National Development and Reform Commission (NDRC), China's top economic planning body, drafted a five-year plan for the development of CBM.

Under the blueprint, China is to increase its annual CBM output to 10 billion cubic meters in 2010. The country will explore and locate an additional 300 billion cubic meters of CBM reserves by 2010. An industrial system will be gradually set up to develop and utilize CBM.

In January, the NDRC outlined the 11th Five-Year Plan (2006-10) for the coal industry. The development and use of CBM was an important element of this plan.

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Also this year, China adopted new preferential tax policies for CBM. Under these new policies, which took effect on January 1, CBM producers will enjoy a full rebate on the value-added tax they pay for CBM production.

Producers will also enjoy corporate income tax exemption on incremental CBM output arising from the application of new technology through research and development funded by their tax rebate.

"These moves will greatly encourage the development and adoption of CBM in China," said Sun. "In 2005 and 2006, China drilled as many CBM wells as it did between 1990 and 2004."

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