Carbon credit in travel demand management: an incentive-based framework for emission reduction

• Using carbon credit as incentive improves environmental and financial sustainability. • A bilevel model captures the interplay between project designers and travelers. • The proposed approach reduces emissions by 40.3 % and lowers project costs by 20.7 %. • Case study reveals that emission reductions lead to increased travel time. Urban transportation has become a dominant source of U.S. greenhouse-gas (GHG) emissions. To mitigate these emissions, this study embeds carbon credits into incentive-based travel demand management (IBTDM) programs and models the designer-traveler interaction as a bilevel optimization: the upper level minimizes system emissions, incentive costs, and total travel time, while the lower level captures travelers’ mode-choice responses to time, cost, and credit incentives. Calibrated with 21,285 trips from the incenTrip mobile application across the Washington, D.C.-Maryland-Virginia corridor, the optimized policy cuts system-wide emissions by 40.3 % and offsets up to 20.7 % of operating costs through generated carbon credits. However, these gains come at a price of 14.6 % longer total travel time, illustrating the inherent trade-off between emission reduction and travel efficiency. Overall, the framework offers a financially sustainable roadmap for scaling app-based IBTDM programs that advance both environmental and economic goals.