The goal of this discussion paper is to contribute to the current policy debate about how to effectively limit or reduce oil consumption and greenhouse-gas emissions from the U.S. transportation sector. The paper explains what is wrong with the status quo and therefore why new policies are needed. It examines special policy challenges in this domain, and analyzes the pros and cons of individual policy measures. Finally, the paper explores the probable overall effects of several illustrative policy packages. A white paper will be issued in early fall 2007 that will provide a new proposal for addressing oil security and climate change in the U.S. transportation sector, taking into account comments received on the content of this discussion paper.