Ab initio QCISD(T)/G-311+G(3df)//MP2/6-31+G(d) calculations of potential energy surface for the reaction of Mg atoms with CO2 show that re-forming of carbon dioxide to carbon monoxide can be significantly enhanced in the presence of Mg atoms. The overall endothermicity of the Mg + CO2 --> MgO + CO reaction is calculated to be about 66 kcal/mol, almost twice lower than the energy needed for spin-forbidden unimolecular decomposition of CO2 to CO + O(P-3). The Mg + CO2 reaction is spin-allowed and the barrier, 68.8 kcal/mol, is greatly reduced as compared to the barrier for the unimolecular decomposition, 131 kcal/mol. The reaction proceeds via the MgOCO cyclic intermediate which lies 14.3 kcal/mol higher in energy than the reactants and stabilized with respect to Mg + CO2 by a barrier of 5.9 kcal/mol. The catalytic role of Mg atoms for re-forming of CO2 to CO is discussed. The reverse MgO + CO --> Mg + CO2 reaction is highly exothermic and has a barrier of 2.8 kcal/mol indicating that magnesium oxide can be rapidly reduced by carbon monoxide producing Mg atoms and carbon dioxide. Highly accurate full valence active space MRCI calculations with extrapolation to the complete basis set allowed us to propose a new value for the standard heat of formation of MgO in the gas phase, 31.4-31.9 and 33.5-34.0 kcal/mol for Delta H(f)degrees(0 K) and Delta H(f)degrees(298 K), respectively. The result is 20 kcal/mol higher than the present recommended value and new experimental measurements of thermochemical data for gaseous MgO are suggested.