The tradeoff between hydrogen buses (H-buses) and electric bus (E-buses) is an important issue in public transportation electrification. This study investigated the feasibility and policy implications of Hong Kong achieving its goal of carbon neutrality via a competitive bus-market mechanism. First, we established a dynamic bus-market evolution model by using the system dynamics method to adopt a generalized Lotka–Volterra model and discrete choice model. We then applied the model to the case of Hong Kong and tested various policies. The results showed that (1) relying on business-as-usual policies and market evolution may result in only 66% of Hong Kong’s bus fleet being zero-emission by 2050; (2) long-term subsidies for H-bus purchases and support for hydrogen stations are effective for H-bus market; (3) carbon tax may not be effective owing to its small proportion of total cost; and (4) policymakers should consider the delay effect of advocacy for green consumption.