China's first commercial carbon capture and storage plant is expected to be operational by the end of the year as construction of the plant's liquidification facility has started, company managers said Wednesday.

The environmentally-friendly plant is being built by Shenhua Group - China's top coal producer - in Ordos City on the steppes of northern China's Inner Mongolia Autonomous Region.

The 210 million yuan (30.8 million U.S. dollars) project is expected to capture 100,000 tons of carbon dioxide every year, Wang Heming, a senior manager in Shenhua Group's Ordos division, said.

China heavily relies on coal to sustain its economy, the world's third largest. But authorities have pledged to slash the carbon intensity of its gross domestic product by 40 to 45 percent from 2005 to 2020. Carbon capture technology has been identified as key to reaching the goal.

Wang said Shenhua is also conducting a feasibility study into a second liquidification facility that will be capable of handling 1 million tons of carbon dioxide annually.

He said a third -- and much larger -- facility capable of handling 3 million tons annually is being planned. But no timetable for its construction has been set.

Wang said tests show Shenhua's liquidification facilities pose no harm to the environment, with carbon dioxide being compressed, liquified and pumped into rocks about 1,000 - 3,000 meters beneath the earth's surface.

A surveillance network will be set up to monitor leaks, Wang said, adding that the storage facility "is tested not to leak for 1,000 years."

But he said the commercial viability of the project is not yet clear.

Standards for the carbon capture industry internationally have not yet been set, and the Chinese government has yet to give companies in the industry favorable treatment, Wang explained.

He said the operating costs of the 100,000-ton facility are estimated at around 50 U.S. dollars per ton.