@submariner- Creating liquid coal fuels is still in the developmental stage and is not yet commercially scalable. Currently the best use for coal is the production of synthetic gas (syngas) for electricity generation.
A syngas plant is also known as a Integrated Gasification Combined Cycle (IGCC) power plant. These plants work by heating the coal to a critical point, causing the hydrocarbons to vaporize. The gas is then passed over a bed of coals which filter out mercury and other heavy metals. The gas is then processed to remove and alter sulfur and nitrogen content. These are the pollutants that cause smog and acid rain, so essentially the syngas is cleaned.
Once cleaned, the gas is burned to run a turbine and generate electricity. After this first combustion cycle, the heat is recovered and used to heat steam to turn another turbine, significantly improving efficiency. The process is similar to oil fractional distillation, but not the same. As of now, this is currently the cleanest coal combustion technique. Plant efficiencies can reach 50% and emissions can be reduced by about 20%, but it is still a long way off from zero emissions.