If the U.S. coal-fired power industry is ever to switch to advanced, cleaner technologies, it will need an effective way to capture and store its emissions of carbon dioxide, a leading greenhouse gas. Blue Source, a company based in Salt Lake City, recently took a positive step in demonstrating a viable strategy when it started up its first carbon-capture and -storage project. Blue Source is piping industrial carbon dioxide from a natural-gas processing plant in southeastern Colorado to an undisclosed oil producer that will, in turn, pump it into an aging oil field. The result should be increased crude production and a carbon-dioxide emissions reduction equivalent to taking 70,000 cars off the road.

Blue Source’s project is innovative not technically–the company employs off-the-shelf technology–but financially: it is among the first whose business plan hinges on the sale of both the captured carbon dioxide and carbon offsets, a financial derivative generated from the emissions reduction. Analysts say that this business model could help commercialize advanced coal-fired power plants and carbon-capture technology that is languishing under weak pollution-control policies in the United States. “Its success will lay the groundwork to enable power-plant projects to go down the same route, should a more extensive carbon policy emerge,” says Alex Klein, a senior analyst tracking developments in power generation for consultancy Emerging Energy Research, based in Cambridge, MA.

Blue Source’s model is viable thanks to a combination of pricey oil and cheaper carbon dioxide. The carbon dioxide that Blue Source is shipping out of the Apple Tree gas processing plant in Colorado’s Huerfano County is cheap because it is already concentrated (unlike the effluent from a conventional power plant, which is diluted with nitrogen gas). The carbon dioxide is stripped off of the gas from the county’s natural-gas wells, which are just 22 percent methane. Most carbon dioxide of this sort is simply vented. Blue Source installed the compressors and pipes needed to pump it to an existing carbon-dioxide pipeline 16 miles away.

Pricey oil helps because oil producers use carbon dioxide to loosen up crude trapped underground and facilitate its flow to the surface. (Carbon dioxide that comes back up with the oil is stripped off and pumped back down.) When a barrel of crude fetches more, oil producers will pay more for carbon dioxide.

Blue Source and its backers are clearly betting that the market for carbon-dioxide remediation will continue to grow as states introduce caps on carbon-dioxide emissions. What’s more, Congress is considering regulating greenhouse gases. (This has already happened in Europe, where a mandated carbon cap-and-trade program has driven the price of carbon-dioxide offsets to more than €20 [$29] per ton. Such offsets sell for just $2 a ton on the Chicago Climate Exchange.) Investment banks agree: last year, Blue Source raised $1 billion in financing through First Reserve, based in Greenwich, CT, the largest private equity firm focused on energy.