This paper examines the effect of residential density on CO2 equivalent from automobile using more specific emission factors based on vehicle and trip characteristics, and by addressing problems of spatial autocorrelation and self-selection. Drawing on the 2006 Puget Sound Regional Council Household Activity Survey data, the 2005 parcel and building database, the 2000 US Census data, and emission factors estimated using the Motor Vehicle Emission Simulator, we analyze the influence of residential density on road-based transportation emissions. In addition, a Bayesian multilevel model with spatial random effects and instrumental variables is employed to control for spatial autocorrelation and self-selection. The results indicate that the effect of residential density on transportation emissions is influenced by spatial correlation and self-selection. Our results still show, however, that increasing residential density leads to a significant reduction in transportation emissions.