This thesis explores the concept of displacement of sorbed methane and enhancement of methane recovery by injection of CO2 into coal, while sequestering CO2. The objective of this study was to investigate the diffusion behavior of San Juan Basin coal under single and competitive gas environments. The movement of gas in a coalbed reservoir starts in the coal matrix with diffusion towards the naturally occurring cleat network surrounding the matrix blocks. The gas production potential from coalbed reservoirs under different gas environments was, therefore, estimated by studying the diffusion behavior of the coal type. The results clearly showed that the rate of diffusion increases with decreasing reservoir pressure, the increase being exponential at low/very low pressure. As a final step, a simulation study was carried out using the experimental results to predict long-term gas production from coalbed reservoirs with and without CO2 injection. This was followed by a preliminary economic analysis in order to estimate the feasibility of enhanced recovery method by CO2 injection by calculating the net present value of a project with and without carbon credits. The results showed that it is possible to obtain significant improvement in methane recovery by CO2 injection. However, it becomes economically feasible only with carbon credits.