Abstract Plug-in hybrid electric vehicles (PHEVs) have the potential to be an economic means of reducing direct (or tailpipe) carbon dioxide (CO 2) emissions from the transportation sector. However, without a climate policy that places a limit on CO 2 emissions from the electric generation sector, the net impact of widespread deployment of PHEVs on overall U.S. CO 2 emissions is not as clear. A comprehensive analysis must consider jointly the transportation and electricity sectors, along with feedbacks to the rest of the energy system. In this paper, we use the Pacific Northwest National Laboratory's MiniCAM model to perform an integrated economic analysis of the penetration of PHEVs and the resulting impact on total U.S. CO 2 emissions. In MiniCAM, the deployment of PHEVs (or any technology) is determined based on its relative economics compared to all other methods of providing fuels and energy carriers to serve passenger transportation demands. Under the assumptions used in this analysis where PHEVs obtain 50–60% of the market for passenger automobiles and light-duty trucks, the ability to deploy PHEVs under the two climate policies modelled here results in over 400 million tons (MT) CO 2 per year of additional cost-effective emissions reductions from the U.S. economy by 2050. In addition to investments in nuclear and renewables, one of the key technology options for mitigating emissions in the electric sector is CO 2 capture and storage (CCS). The additional demand for geologic CO 2 storage created by the introduction of the PHEVs is relatively modest: approximately equal to the cumulative geologic CO 2 storage demanded by two to three large 1000 megawatt (MW) coal-fired power plants using CCS over a 50-year period. The introduction of PHEVs into the U.S. transportation sector, coupled with climate policies such as those examined here, could also reduce U.S. demand for oil by 20–30% by 2050 compared to today's levels.