Direct road pricing inevitable as fuel excise revenue collapses

By Leith van Onselen

Yesterday’s AFR National Infrastructure Summit featured robust discussion about direct road user charges:

New Infrastructure Australia chief executive Romilly Madew said road user charging was definitely on the infrastructure agenda and needed to be pushed through to compensate for falling income from fuel taxes as people shifted to electric vehicles.

Michael Cosgrave, the head of infrastructure regulation for the Australian Competition and Consumer Commission, said it was inevitable that at some point road user charging would need to be implemented by governments but it would be a ”complex issue” in ensuring the public was on side…

Marion Terrill, transport and cities program director at the Grattan Institute, said social equity was the issue on which congestion charging would “sink or swim.”

Personally, I think that direct road user charges are inevitable as revenue from fuel excise continues to collapse, brought about by the shift to both more efficient conventional vehicles as well as electric vehicles:

The economic arguments for shifting to direct road user charges in place of fuel excise are also sound.

First, 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 improving efficiency through better managing congestion.

Second, 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.

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.

That said, the politics is fraught and pricing needs to be implemented equitably so that it doesn’t overly punish poorer workers in the outer-suburbs, where public transport options are limited.

Easier said than done.

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