But that green vision proved too expensive and complicated. So the administration accepted a trade-off.
To help the environment, the government allows power companies to sell the carbon dioxide to oil companies, which pump it into old oil fields to force more crude to the surface. A side benefit is that the carbon gets permanently stuck underground.
The program shows the ingenuity of the oil industry, which is using government green-energy money to subsidize oil production. But it also showcases the environmental trade-offs Obama is willing to make, but rarely talks about, in his fight against global warming.
Companies have been injecting carbon dioxide into old oil fields for decades. But the tactic hasn't been seen as a pollution-control strategy until recently.
Obama has spent more than $1 billion on carbon-capture projects tied to oil fields and has pledged billions more for clean coal. Recently, the administration said it wanted to require all new coal-fired power plants to capture carbon dioxide. Four power plants in the U.S. and Canada planning to do so intend to sell their carbon waste for oil recovery.
Just last week, former Energy Secretary Steven Chu announced he was joining the board of a company developing carbon capture technology.
The unlikely marriage of coal burners and oil producers hits a political sweet spot.
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It silences critics who say the administration is killing coal and discouraging oil production. It appeases environmentalists who want Obama to get tougher on coal, the largest source of carbon dioxide.
It also allows Obama to make headway on a second-term push to tackle climate change, even though energy analysts predict that few coal plants will be built in the face of low natural gas prices and Environmental Protection Agency rules that require no controls on carbon for new natural gas plants.
"By using captured man-made carbon dioxide, we can increase domestic oil production, promote economic development, create jobs, reduce carbon emissions and drive innovation," Judi Greenwald told Congress in July, months before she was hired as deputy director of the Energy Department's climate, environment and energy efficiency office.
Before joining the Energy Department, Greenwald headed the National Enhanced Oil Recovery Initiative, a consortium of coal producers, power companies and state and environmental officials promoting the process.
But the environmental benefits of this so-called enhanced oil recovery aren't as certain as the administration advertises.
"Enhanced oil recovery just undermines the entire logic of it," said Kyle Ash of Greenpeace, one of the few environmental groups critical of the process. "They can't have it both ways, but they want to really, really bad."
That has become a theme in some of Obama's green-energy policies. To promote new, cleaner technologies, the administration has allowed companies to do things it otherwise would oppose as harmful to the environment.
For wind power, the government has shielded companies from prosecution for killing protected birds with giant turbines.
For corn-based ethanol, the administration underestimated the environmental effects of millions of new acres of corn farming. The government even failed to conduct required air and water quality studies to document its toll on the environment.
The administration wants to make similar concessions to make carbon-capture technology a success.
The EPA last week exempted carbon dioxide injection from strict hazardous waste laws. It classified the wells used to inject the gas underground for oil production in a category that offers less protection for drinking water.
Oil companies using carbon to get oil also aren't subject now to the tougher reporting and monitoring requirements that experts say are necessary to ensure the carbon stays underground, and they're fighting an EPA proposal that would require them to be if the carbon comes from power plants covered by the new federal rules.
"It amounts to looking the other way," said George Peridas, a scientist with the Natural Resources Defense Council, which supports using carbon for oil extraction. The group believes it replaces dirtier oil or oil produced in more environmentally sensitive places and reduces carbon in the atmosphere.
The administration also did not evaluate the global warming emissions associated with the oil production when it proposed requiring power plants to capture carbon.
A 2009 peer-reviewed paper found that for every ton of carbon dioxide injected underground into an oil field, four times more carbon dioxide is released when the oil produced is burned.
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"There is no form of energy that is free of impacts. It is always about trade-offs and someone will always be unhappy," the paper's author, Paulina Jaramillo, the assistant professor at Carnegie Mellon University, said in an interview.
Administration officials counter by saying the oil was going to be extracted anyway, so the policy should only be seen as reducing carbon dioxide from coal plants.
The administration also promotes the benefits for energy security. Every barrel of oil produced here will mean one less produced abroad.
"We are taking carbon dioxide that would have gone to the atmosphere in coal plants, storing it and displacing imported oil with domestic oil," said Energy Secretary Ernest Moniz, asking a question posed by The Associated Press on C-SPAN's "Newsmakers" program in September.
In Mississippi, where Southern Company's Kemper County power plant eventually will supply two oil producers with carbon dioxide, Denbury Resources Inc. says it would not be able to produce oil there otherwise.
Denbury is already using carbon dioxide trapped beneath a salt dome near Jackson to produce oil in the state. But it can use more carbon dioxide than nature can provide. That's where the power plant comes in.
The federal support for Kemper lowers the cost of installing the carbon capture equipment, and ultimately, the cost of carbon dioxide for the oil producer.
The company has entered into a long-term contract with Southern for carbon dioxide. It will permit Denbury to recover a total of between 3.5 million and 4.2 million barrels of oil, a tiny fraction of the 91 million barrels of oil the world consumed daily last month. But for the oil companies, it still means millions of dollars more in revenue.
The nearly $5-billion project received $270 million from the Energy Department, prior to the Obama administration, and $279 million more in federal tax credits.
A member of Mississippi's Public Service Commission, Brandon Presley, bristled over what he described as pressure from Washington to approve the project, which already has meant a 15 percent increase in utility bills for Mississippi Power customers.
Secretary Chu wrote Presley a letter in May 2010 that said without the Kemper County project, the U.S. government might not be able to use the technology anywhere. The commission approved it over Presley's objection.
"The (Energy Department) is knee deep in this," Presley said. "I don't think you'll find anywhere in the country where you've found more heavy-handedness by the federal government or by elected officials than what went on here to try and get this passed."
In an interview with the AP, Chu said pairing oil production with pollution reduction is an imperfect method for "developing the capture and ramping up the technologies."
"It's not one for one," he said. "You are not sequestering all the carbon dioxide."
While Kemper is the first, it's not the only one.