Transition to sustainability is a top priority of the European Union transport policy for the coming decades. Among other energy end-use sectors in the Europe, transport is the only one with increasing greenhouse gas emissions. This study applies system dynamics modelling approach to develop a white box modelling tool for a comprehensive policy analysis in the transport sector. The results show that emissions from Latvian road transport sector will continue to increase in response to economy development even considering fuel economy improvement. Introduction of policy measures aimed for reduction of transport demand, mode shift and penetration of alternative fuel vehicles can provide benefits in range 3-27% compared to the reference scenario.