Conserving energy and reducing carbon emissions have become the common responsibility of the international community. During the year 2010, the Taiwan government planned a four-year project budgeted at 300 million US dollars, called "The Penghu Low Carbon Island Development Project." The policy objective is to use Penghu Island (population 85,000) as a test platform to evaluate new ways to conserve energy and reduce carbon emissions before attempting to replicate the policies on Taiwan Island. For Taiwan, a zero carbon island green transportation policy will regulate the total number of electric scooters, the total number of gasoline motorcycles, influence government subsidy incentives, and create the need for new motorcycle license issuing and control. These factors interact with each other to form a complex and dynamic system that impacts policy as well as the current way of life. In this study, a system dynamics approach is designed to construct a model for evaluating the green transportation policy on Penghu Island. Simulations are conducted to model green transportation system behavior and related policy effects in a smaller, controlled environment before creating policies for Taiwan Island that will impact the lives of over 23 million people.