Methane, a major contributor to global warming, is a greenhouse gas emitted from coal mines. Abundance of coal mines and consequently a considerable amount of methane emission requires drastic measures to mitigate harmful effects of coal mining on the environment. One of the commonly adopted methods is to use emitted methane to fuel power generation systems; however, instability of fuel sources hinders the development of systems using conventional prime movers. To address this, application of Stirling engines may be considered. Here, we develop a techno-economic methodology for conducting an optimisation-based feasibility study on the application of Stirling engines as the prime movers of coal mine CHP systems from an economic and an environmental point of view. To examine the impact of environmental policies on the economics of the system, the two commonly implemented ones (i.e. a carbon tax and emissions trading scheme) are considered. The methodology was applied to a local coal mine. The results indicate that incorporating the modelled system not only leads to a substantial reduction in greenhouse gas emissions, but also to improved economics. Further, due to the heavy economic burden, the carbon tax scheme creates great incentive for coal mine industry to address the methane emissions. (C) 2013 Elsevier Ltd. All rights reserved.