The relationship between the electronic structure of CaO and the binding energy, BE, shifts between surface and bulk atoms is examined and the physical origins of these shifts are established. Furthermore, the contribution of covalent mixing to the interaction, including the energetic importance, is investigated and found to be small. In particular, the small shift between surface and bulk O(1s) BEs is shown to originate from changes in the polarizable charge distribution of surface O anions. This relationship, which is relevant for the catalytic properties of CaO, follows because the BE shifts are dominated by initial state contributions and the relaxation in response to the core-ionization is similar for bulk and surface. In order to explain the dominance of initial state effects for the BE shifts, the relaxation is decomposed into atomic and extra-atomic contributions. The bonding and the core-level BE shifts have been studied using cluster models of CaO with Hartree-Fock wavefunctions. The theoretical shifts are compared with X-ray photoelectron spectroscopy measurements where both angular resolution and incident photon energy have been used to distinguish surface and bulk ionization.