Abstract: The technology of CO₂-enhanced coalbed methane (CO₂-ECBM) can reduce greenhouse gas emissions, and has the function of clean energy production and environmental protection. In order to study the drainage and production laws of CH₄ production by CO₂ injection in water-bearing coal seams under gas-water two-phase flow conditions, as well as the effects of different initial water saturation and CO₂ injection conditions on CH₄ production, CO₂ storage, and reservoir permeability. A coupled fluid-solid-thermal model for competitive adsorption, temperature changes, coal deformation, and water transport was constructed. The high accuracy of the model was demonstrated by comparing with the field data, existing experiments and numerical solutions of existing model, and the advantages of the model were specified. CO₂-ECBM numerical simulation were subsequently carried out using COMSOL. The results shown that, CO₂ injection can enhance the rate and amount of CH₄ production, which indicated the feasibility of CO₂ injection to increase production. With the continuous CO₂ injection, the CH₄ concentration in the reservoir decreased, the CO₂ concentration increased, the temperature near the gas injection well increased, the temperature near the production well decreased and the temperature from the gas injection well to the production well slowly decreased. Water phase relative permeability gradually decreased and gas phase relative permeability gradually increased during gas injection and extraction period. Due to the combined effect of effective stress and matrix shrinkage/expansion, the reservoir permeability exhibited a trend of “decrease-increase-decrease”. The higher the initial water saturation of the coal seam, the lower the CH₄ production and the lower the permeability decrease. The maximum decrease in cumulative CH₄ production was 15.19%. Ignoring the impact of water in coal seams can overestimate CH₄ production, and the impact of coal seam water should be considered in numerical simulation. The higher the CO₂ injection temperature and pressure, the greater the CH₄ production and the greater the permeability decrease. The cumulative CH₄ production increased by 13.27% and 39.77%, and permeability decreased by 20.4% and 46.14%, respectively. Increasing the CO₂ injection temperature and pressure was conducive to increase CH₄ production.