In transport applications, reciprocating internal combustion engines still have important advantages in terms of endurance and refueling time and available infrastructure when compared against fuel cell or battery-based powertrains. Although conventional internal combustion engine configurations produce important amounts of greenhouse gases and pollutant emissions, oxyfuel combustion can be used to mitigate to a great extent such emissions, mainly producing NOx-free, CO2 and H2O exhaust gases. However, the oxygen needed for the combustion, which is mixed with flue gases before entering the cylinder, has to be stored in an additional tank, which hinders the adoption of this technology. Fortunately, the latest developments in gas separation membranes are starting to produce extremely-high selectivity and high permeability oxygen-separation membranes. Using the waste heat of the exhaust gases to heat up a mixed ionic-electronic conducting membrane, and feeding it with pressurized air, it is possible to produce all the oxygen needed by the combustion process while keeping the whole system compact. This works presents a design of an oxy-fuel combustion engine with in-situ oxygen production. The numerical simulations show also that this concept keeps a competitive brake specific fuel consumption, while the high concentration of CO2 in the exhaust gases facilitates the introduction of carbon sequestration technologies, leading to potentially carbon-neutral internal combustion engines.