North China's Shanxi Province, the heart of the country's coalmining industry, will start collecting money from mines next month to set up the country's first sustainable development fund for the coal industry.

All the coalmines in the province will have to contribute to the fund.

Shanxi accounts for a quarter of the nation's coal output. Last year China produced nearly 2.4 billion tons of coal.

But years of exploitation have saddled the province with heavy ecological and social problems. It has been estimated that waste and pollution have cost Shanxi about 30 billion yuan (US$3.9 billion) over the past five decades.

The development fund was designed to gradually establish an ecological recovery and compensation mechanism to deal with damage to the environment.

It will also provide seed money to help the province's coal-centered industries adjust once the mines are depleted.

The province's coal-mines will have to pay a few dozen yuan per ton of coal, depending on its quality, the size of the mine and its annual output.

The idea to create the fund came after the central government launched a series of pilot projects to promote sustainable development within the coal industry last year.

Several similar funds, including a mine environment recuperation deposit fund and an industrial transformation fund, are also in the pipeline. If they prove successful, such funds could be promoted nationwide.

"The decision to set up these funds is most welcome," Li Yizhong, minister of the State Administration of Work Safety, said earlier this month.

"They will provide financial guarantees to mines in dealing with environmental problems and help create new modes of economic growth after our resources are depleted," he said.

"And there will be more money put into upgrading safety standards at coal mines."

The fund is expected to grow to about 10 billion yuan (US$1.3 billion) this year, officials at the local taxation bureau in Shanxi estimated.

The fees attached to the fund will add a few dozen yuan to the cost of extracting a ton of coal and so will have little impact on coal prices due to the huge supply surplus, said Li Chaolin, an observer of the coal industry.

(China Daily March 29, 2007)