Distance based road pricing is the future

The Federal Chamber of Automotive Industries (FCAI) is pressuring the federal government to replace Australia’s convoluted vehicle registration, stamp duty, licence fees and fuel excise system with a single road-user charge that taxes drivers for every kilometre they drive:

“An efficient road-user charging scheme can address all vehicle users regardless of the type of vehicle they drive, how often it is driven and the purpose of the travel,” [FCAI chief Tony Weber] said. “For example, it could be based on vehicle mass, distance travelled, time of travel or a combination of factors.”

The chamber’s discussion paper, to be released on Wednesday, lists several potential scenarios including the capacity to build in congestion and peak-hour charges on motorists to help clear grid-locked freeways in Melbourne and Sydney…

“Over the longer term we believe a comprehensive approach to road-user charging that remains technology-neutral will result in a greater benefit to motorists and to governments. Opportunities for important reforms like this are not common”…

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.

Given that technology is no longer a barrier, the federal government should move forward with road pricing reform. It should also dedicate some of the revenue to rolling out charging stations and infrastructure across Australia to facilitate the take up of electric vehicles.

Unconventional Economist
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