This paper presents the International Energy Agency＇s (IEA) approach of modelling transport energy demand, Fuel demand, which is not a demand per se, is derived, whenever possible, from the economic activity in the transport sector and not estimated directly, ie using one equation or (simultaneous) equation system, In general, the transport models employ a ＇two-step-approach＇: in the first step, transport activity, the sector＇s relevant energy service, is estimated econometrically, In the second step, the transport activity projections are then combined with estimates of efficiency improvements, car turnover rates and diesel/gasoline penetration assumptions in order to arrive at projections of fuel demand, The principal advantages of this approach are that the relevant energy services are modelled and that, for model simulation, efficiency improvements can be dealt with explicitly. The effectiveness of economic instruments is a function of the reaction of consumers (and businesses) to income and price changes. An in-depth understanding of income and price elasticities of transport demand and transport energy demand is important in order to be able to assess the effectiveness of policies considered, The paper also shows the underlying long-term income and price elasticities for OECD and non-OECD regions.