We calculated the optical absorption and luminescence energies of electrons trapped at oxygen vacancies in CaO using a consistent embedded cluster method which accounts for the long-range polarization effects and partial covalence of CaO. Optical absorption and luminescence energies of neutral (F center) and positively charged (F+ center) vacancies are calculated by means of time dependent density functional theory using the B3LYP exchange-correlation density functional. Our results demonstrate that using large basis sets to describe a diffuse nature of excited states, and properly accounting for long-range polarization induced by charged and excited defect states, is crucial for accurate predictions of optical excitation and luminescence energies of these defects.