China will invest over one trillion yuan (about US$127 billion) in developing an alternative coal-based energy source to ease the country's dependence on oil imports, according to the National Development and Reform Commission (NDRC).

The project aims to produce 30 million tons of liquefied coal and 20 million tons of dimethyl ether (DME) by 2020.

Coal-to-olefin (CTO) output is expected to hit 8 million tons and coal methanol to reach 66 million tons.

Traditional coal-chemical industries that have been guilty of overproduction, such as calcium carbide and coke, will be kept under control.

The money will also be spent on building seven industrial bases nationwide to produce coal-based energy source on a massive scale, including the biggest alternative fuel production base in the lower reaches of the Yellow River.

Xinjiang is projected to produce 10 million tons of liquefied coal, and the eastern region of Inner Mongolia will become the major methanol supplier, with an annual capacity of 10 million tons.

A pipeline, at a cost of five billion yuan, will be built to transport 10 million tons of methanol a year from Inner Mogolia to the northeastern Liaoning province.

As the technology is still in the experimental phase, the NDRC said in July that coal liquefaction projects should not be approved until a national development program for the industry is completed.

Coal-chemical projects must meet environmental requirements and those that fail to meet the safety requirements in transportation should not receive the green light, said the NDRC.

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