The People`s Republic of China (hereafter referred to as China) is the largest producer and consumer of coal in the world. The dominance of coal in China`s energy balance has come at a high price to the environment. With the recent attention given to global warming issues, China`s energy consumption and production practices have become the subject of much concern. Of particular concern is China`s ability to reduce CO{sub 2} emissions by constraining coal use and the impact such policies will likely have on the Chinese economy. The study is divided into two reports. Volume 1 focuses on the full coal fuel cycle, emissions, and environmental effects. This report (Volume 2) analyzes various CO{sub 2} mitigation strategies and determines their effect on economic growth. Contrary to what some analysts have claimed, the current work suggests that it would not be costly for the Chinese to reduce CO{sub 2} emissions. In fact, some strategies were accompanied by increases in China`s energy and economic efficiency, which actually stimulated economic growth.