High‐occupancy vehicle (HOV) lanes have been promoted to encourage carpools, reduce traffic congestion, and improve air quality. At the partial equilibrium level, commuting with three workers per automobile clearly reduces highway congestion, lowers carbon emissions, and saves energy compared with three single drivers. This paper develops a numerical urban simulation model to generate the general equilibrium effects of HOV lanes on urban spatial structure, energy use, and greenhouse gas emissions. The major findings are that while HOV lanes reduce traffic congestion and improve welfare, the fall in transportation cost leads to urban sprawl, which results in higher dwelling energy use and a larger carbon footprint. Overall, the HOV lane policy has little effect on total energy consumption and carbon emissions. This is another classic case of general equilibrium effects reversing the partial equilibrium effects of an urban policy. In contrast, a gasoline tax policy leads to less urban sprawl but is less effective at lowering energy consumption and carbon emissions. Imposing congestion tolls is a more effective tool at reducing traffic congestion, saving energy, and lowering carbon emissions.