Oxy-fuel combustion is the process of burning a fuel using pure oxygen, or a mixture of oxygen and recirculated flue gas, instead of air. Since the nitrogen component of air is not heated, fuel consumption is reduced, and higher flame temperatures are possible. Historically, the primary use of oxy-fuel combustion has been in welding and cutting of metals, especially steel, since oxy-fuel allows for higher flame temperatures than can be achieved with an air-fuel flame. It has also received a lot of attention in recent decades as a potential carbon capture and storage technology.

There is currently research being done in firing fossil fuel power plants with an oxygen-enriched gas mix instead of air. Almost all of the nitrogen is removed from input air, yielding a stream that is approximately 95% oxygen. Firing with pure oxygen would result in too high a flame temperature, so the mixture is diluted by mixing with recycled flue gas, or staged combustion. The recycled flue gas can also be used to carry fuel into the boiler and ensure adequate convective heat transfer to all boiler areas. Oxy-fuel combustion produces approximately 75% less flue gas than air fueled combustion and produces exhaust consisting primarily of CO₂ and H₂O (see figure).