Major Projects Minister Paul Fletcher will today announce a new 15 year infrastructure plan, which will investigate the prospect of replacing fuel excise with direct road user charging over a 10 to 15 year period. From The AFR:
The road-user charge has long been suggested by motoring groups and tax experts as a way to maintain revenue to build and fix roads as vehicles become more fuel efficient and eventually move away from petrol and diesel altogether…
“Of course, any move to implement change, including road user charging, would be a ten to fifteen-year journey and would only go ahead if governments are confident that the benefits to the community of any new arrangements outweigh the costs,” he said.
But as vehicle technology changed, fuel tax of about 40¢ per litre was becoming less efficient and more inequitable…
It would also mean a more direct connection between what people pay and how the money is spent.
Shifting away from fuel excise to direct charging makes sense on a number of levels.
First, the gradual shift towards electric-powered vehicles means that taxes collected on road use will likely fall as fuel excise receipts collapse. Thus, a direct charging system will help maintain the revenue base.
Second, if road user charges vary by location, time of day and distance travelled, they would encourage people to take non-essential trips at a different time, or not at all, thus reaping efficiencies through better managing congestion. As noted by The Urbanist, Alan Davies:
Congestion charging discourages drivers who make relatively low value trips. Those who aren’t prepared to pay will make the trip at another time, shift to public transport, or decide it’s not worth making.
According to research cited in the State of Australian Cities 2012 report, only one third of AM peak motorised trips in Melbourne are for work. Moreover, 17% are for recreation and shopping purposes. The pattern for Sydney is similar.
It only takes a reduction of around 5% in the number of vehicles to increase average vehicle speeds by 10-30%. It won’t be at the speed limit necessarily, but it will be fast enough to satisfy the expectations of most drivers…
[Moreover] by reducing demand at the margin, congestion pricing delays or puts off entirely the need to invest in costly new infrastructure…
Third, the ability to observe road users’ willingness to pay for road space will give better signals to transport authorities of where additional road capacity should be built.
Fourth, the road freight industry could benefit greatly from more direct charging.
Currently, road infrastructure owners have a perverse incentive to limit usage of the road network by more productive (heavier) vehicles in order to limit road damage, precisely because they are not directly compensated for additional road wear and tear. A direct fee-for-use system – which incorporates location, vehicle weight, time of day and distance travelled – would allow freight haulers to choose to pay for a higher level of road consumption, leading to potential productivity benefits.
Finally, with an effective road charging scheme in effect, there would be less need to regulate to prevent sprawl, and people would be freer to make trade-offs between housing cost and location.
While direct road charging is a big step, both politically and technically, it is definitely worth pursuing.
