Owing to fierce global warming, carbon reduction and energy saving approach has become the common responsibility of the international communities. While humans face the global warming problem, low-carbon city or low-carbon living circle has gradually become the key point to low-carbon economy and low-carbon society. Thus, many governments and cities start to advance all kinds of low-carbon living circle policies and measures to reduce the emission of carbon dioxide. However, the verification and technical plan of low-carbon living circle can help the administration areas to implement the goal of carbon reduction. In our in-depth case study, we apply the methods to Taiwan’s Penghu County’s (Taiwan’s largest island) low carbon island development project of green transportation policy. First, we use the economic input-output life cycle assessment (EIO-LCA) and location quotient methods from top to bottom level to effectively assess the industrial sectors’ carbon footprint in Taiwan’s Penghu County. Based on the assessment of carbon emissions in the given region, then this research applies system dynamics (SD) approach to construct a cost-benefit evaluation quantitative model. Finally, the policy scenarios are simulated to evaluate the time-varying impacts of proposed green transportation strategies. This research shows that Transport and Communications, Agricultural, Forestry, Fishery and Husbandry, Trade, Accommodation and Eating-Drinking places and Electricity, Gas and Water have the greatest impact on Penghu's environment. And “Changing gasoline motorcycles into electric scooters, Limitation of two-stroke gasoline motorcycles road permission and Limitation of gasoline motorcycles licenses’ permission” is the best carbon reduction benefit policy in the simulation result of green transportation strategies which is enforced until 2030.