This paper develops a system dynamics model of Iceland's energy sector (UniSyD_IS) that is based on the
UniSyD_NZ model of New Zealand's energy economy. The model focuses on the energy supply sector
with endogenous representation of road transport energy demand. Equilibrium interactions are
performed across electricity, hydrogen, biofuels, and road transport sectors. Possible transition paths
toward a low-carbon transport in Iceland are explored with implications for fuel demand, greenhouse
gas (GHG) emissions and associated costs. The consumer sector simulates the long-term evolution of
light and heavy-duty vehicles through a vehicle choice algorithm that accounts for social influences and
consumer preferences. Through different scenarios, the influences of four fundamental driving factors
are examined. The factors are oil price, carbon tax, fuel supply-push, and government incentives. The
results show that changes in travel demand, vehicle technologies, fuel types, and efficiency improvements can support feasible transition paths to achieve sufficient reduction in GHG for both 4 1C and 2 1C
climate scenarios of the Nordic Energy Technology Perspectives study. Initial investment in supply
infrastructure for alternative fuels will not only mitigate GHG emissions, but also could provide longterm economic benefits through fuel cost saving for consumers and reduced fuel import costs for
government