One plan is to use disused coal seams to absorb and store emissions.
Pioneering research into burning coal underground to generate energy is one of the projects to benefit from an £8.3m scheme to tackle climate change.
It is hoped Cardiff University's Seren project will create 150 "green jobs" and help companies develop new products and technology.
Research will also examine the possibility of storing carbon to cut greenhouse emissions and fuel costs.
As part of the programme a borehole will be sunk into a coalfield.
This is in order to trial and prove the technology of burying and storing carbon in the large deposits of coal that exist in seams that cannot be mined.
Officials said research into more "efficient extraction of heat" from the ground, in order to provide heat energy to buildings, would also be carried out.
Professor Hywel Thomas, of Cardiff University, said: "The technologies developed on the Seren project will help create new industries such as coal gasification and carbon capture, here in Wales, and will also be showcased worldwide to help promote Welsh companies on the international stage."
A programme of lectures, seminars and workshops will take place as part of the initiative to train the workforce in the low carbon economy.
Deputy First Minister Ieuan Wyn Jones said the research was vital to "position Wales as a world leader in this area and help meet our energy targets".
"At the heart of the Seren programme is a commitment to foster a climate of innovation which will lead to more highly skilled jobs, enterprise creation and inward investment for the benefit of the whole convergence area of west Wales and the valleys," he said.
Seren is backed with £4.6m from the European Regional Development Fund through the Welsh Assembly Government. Further funding is from the British Geological Survey, the private sector and Cardiff University.