Automobiles are still increasing in number in Japan. If this continues, CO2 emissions in this sector may increase through the first half of the 21st century. Consequently, a study of measures for reducing these CO2 emissions is essential. In this paper, possible automotive technologies, improvements in fuel consumption and the introduction of electric vehicles are discussed. These measures are then evaluated for the Japanese case. Furthermore, market penetration of these technologies is evaluated, using life-cycle cost analysis based on initial cost and annual fuel cost. It is concluded that reducing CO2 emissions to 1995 levels by 2010 is possible. This would require the simultaneous implementation of fuel-consumption improvements and the introduction of electric vehicles. However, automotive consumers would be reluctant to accept these technologies, particularly electric vehicles, because of their high purchase-price and low benefits in terms of operating economy. Acceptance will require financial and institutional support from the public sector in introducing these automotive technologies into the Japanese transportation sector.