Local governments in China are stepping up support for hydrogen fuel cell projects as part of wider efforts to promote green energy in the world’s largest auto market.

Shenzhen-listed Beijing Shouhang IHW Resources Saving Technology Co. became the latest company to receive government backing for a hydrogen fuel cell business when it signed a cooperation agreement with the Datong city government in Shanxi province Monday. The city authorities pledged to grant Beijing Shouhang priority in accessing the government’s 2 billion yuan hydrogen industry investment fund, low-interest loans and tax support.

Beijing Shouhang plans to set up three hydrogen production plants and more than 10 hydrogen stations for vehicles in Datong. The agreement is part of Datong’s push to shift its economy from coal production to clean energy. Hydrogen fuel cells use a chemical reaction between hydrogen and oxygen to generate electricity that can be employed in powering vehicles.

Dozens of city governments have unveiled similar projects to develop the hydrogen industry, including Jiaxing in Zhejiang and Changshu in Jiangsu. Local governments’ enthusiasm reflects Beijing’s signals of continued support for hydrogen fuel cell vehicles despite its decision to slam the brakes on subsidies for electric cars.

Huang Libin, a spokesman for the Ministry of Industry and Information Technology (MIIT), said earlier this week that China will push ahead with the development of hydrogen energy and the fuel cell vehicle industry. Pure, battery-powered electric vehicles are more suitable for urban and short-distance passenger travel, while hydrogen fuel cells are more suitable for long-distance and large commercial vehicles, Huang said.

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