Enhanced coal bed methane recovery (ECBM) process is an important developing technology because of its dual advantage, i.e., producing methane gas and sequestering CO2 at the same time. CO2 have been used for enhanced oil recovery (EOR) for more than five decades but available storage sites for EOR are only limited to oil rich countries. Pakistan has one of the largest coal reserves in the world accounting to more than 185 billion tons. In this study, CO2 sequestration in the coalbeds of Thar coal field located in the South of Pakistan is explored from the technical and economical point of view. Potential CO2 storage capacity and methane gas‐in‐place has been calculated for the Thar coal fields. Next, an economic analysis has been performed to evaluate the cost of CO2 storage and to explore any economic benefit from the methane production. Usually, coal reservoirs are saturated with water, hence water production along with methane is inevitable. This study analyzed various water treatment methods and recommended shallow re‐injection technology to be the most suitable for the Thar coal ECBM process. In addition, carbon balance has been investigated to calculate the CO2 avoided during the ECBM process. Finally, a sensitivity analysis has been performed on some of the important design variables in order to analyze their effect on the cost of CO2 storage. © 2017 American Institute of Chemical Engineers Environ Prog, 37: 900–911, 2018