This paper presents methodology and assumptions underlying the DTReM-LV model. DTReM-LV (Dynamic TRansport emission Model for Latvia) is a System Dynamics based computer simulation model for CO2 emission mitigation analysis in the road transport sector in Latvia. To date, decoupling transport energy consumption from increasing greenhouse gas emission has proved to be a difficult and challenging task. The DTReM-LV model aims to forecast CO2 emission generation from transport sub-sectors in response to changes in social, economic and technical aspects, as well as policies. The model gives better understanding of the underlying factors behind emission generation in the road transport sector and is applicable for the analysis and design of clean transport policies at the state level.