A road user charge for electric vehicle use in Australia seems not a matter of if, more a question of when. But should common sense prevail, it won’t just apply to EVs.
Early this year, Federal Treasurer Jim Chalmers was said to have floated the idea at a private dinner event, and again mentioned road user charges in June — but not specifically in relation to electric vehicles. The subject was also reportedly raised at meeting of transport leaders and government officials at a forum Sydney this week.
Now it appears a road user charge will see further discussion at The Economic Reform Roundtable, being held in Canberra from 19 to 21 August. The event involves leaders from business, unions, the community, government and various experts. They’ll be getting their heads together to build consensus on ways to improve productivity in Australia, enhance our economic resilience and strengthen budget sustainability.
The reasoning often put forward for introducing an EV road user charge is two-fold.
Fuel Excise Avoidance
Electric vehicle owners don’t pay fuel excise (aside from those with plug-in hybrids when they top-up with petrol), and fuel excise pays for roads.
Sort of.
The current rate for fuel excise is 51.6 cents for every litre of fuel purchased, but a rebate (tax credit) is provided to some eligible businesses. Fuel excise is collected by the Federal Government1 and goes into general revenue, which can be spent on just about anything; including roads2.
According to the Parliamentary Budget Office:
“Since 1992, successive Australian Governments have established road funding levels solely in the budget process and there has been no effective link between fuel excise and road expenditure.”
The Australian Automobile Association states it works out only 57% of the value of fuel excise collected went back into land transport projects in the decade to 2022-23.
But it’s not just electric vehicles that have (some, but increasing) impact on fuel excise collection. Fuel excise has declined as a proportion of Australian Government revenue over the last 40 years; long before electric vehicles hit the scene. And as vehicles generally become more efficient and fuel more expensive, the federal government will be collecting less at the pump.
So, something has to give; but it’s not just an EV issue.
Road Damage
Electric vehicles can be on the heavy side due to the weight of their batteries and it’s claimed this will lead to increased road damage. But the number of big utes and SUVs on the roads is also growing.
The Federal Chamber of Automotive Industries (FCAI) says July’s top 3 best- selling vehicles in Australia were:
- Toyota Hilux (2100 kg to 2286 kg)
- Toyota RAV4 (1650 kg to 1760 kg)
- Ford Ranger (2,156 kg to 2,390 kg)
And the top 3 EVs (TheDriven):
- BYD Sealion 7 (2,225 kg – 2,340 kg)
- Tesla Model Y (1,900 kg – 2,000 kg)
- Geely EX5 (1,715 kg – 1,765 kg)
According to a report released by Transport Energy/Emission Research (TER) last year:
“… the fact that fossil-fuelled (petrol, diesel, LPG) internal combustion engine (ICE) cars have also consistently increased their mass over time (car obesity) is often ignored.”
Again, it’s not just an electric vehicle issue — and electric and ICE light vehicles aren’t doing most of the damage. It’s trucks.
Solution: A *Universal* Road User Charge
The Australian Electric Vehicle Association (AEVA) has repeatedly stated that any future federally collected road user charge must apply to all vehicles, and regardless of fuel source. It backs a universal charge based on mass × distance to ultimately replace fuel excise.
“A universal, mass × distance road user charge would serve the same role as fuel excise – a pay-by-use system which is proportional to the impact driving has on society and infrastructure,” said AEVA National President Dr Chris Jones late last month. “EV drivers don’t have a problem with it – we just want to ensure the system is fair.”
Professor John Quiggin from the School of Economics at The University of Queensland also supports a universal road user charge, but in terms of impacts on society also points out:
“In a properly functioning economic system, fuel taxes should be considered a charge on motorists for the harmful pollution their vehicles generate.”
Footnotes
- States can’t collect excise, and this is why Victoria’s application of an EV road user charge ultimately failed. ↩
- At a state/territory level, car registration fees usually go into that jurisdiction’s general revenue, and from there can also help to pay for roads. Additionally, council rates help fund maintenance of local roads. ↩
About Michael Bloch
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I’m with John Quiggin.
RUC for all and a reduced fuel excise with a higher weighting for diesel and no exemptions for off road use.
Spineless Labor will take the easy out though.
As an EV owner, I feel road levies are inevitable, but also feel the rate should be weight & distance levied. I feel this would be best managed by a levy on registration: the vehicle owner would state the expected annual mileage with 10Kkms being the minimum charge, so the levy would be pre-paid. If the amount expected was exceeded, extra distance can be paid, or if left until the following registration, a penalty interest charge could be added. I feel the rate should be around 1.5c/Km/tonne. (so around 2.5c/Km levy for average EV).
I, too, feel this levy should be universal on all vehicles. The fuel excise could be reduced by a similar amount (say 15% reduction), The levy would be payable on all road-going vehicles, so no reduction for business because all vehicles damage the roads to some extent.
I also feel the levy should only be used for transport: roads, rail, cycle ways, footpaths etc. Local councils could also be funded partly by funds from this pool, based on needs.
Even a road user charge is an idiot idea, because it disproportionately punishes users like the trucking industry, who are hauling freight not for their benefit but for ours. They’ll pass the costs back to us, and we’ll end up paying them anyway, as consumers.
The truth of road funding, as somebody who works with it every day, is that it’s been woefully inadequate for decades, well before EVs came on the scene, even with fuel excise. Most local councils are millions in arrears with basic road maintenance, because there’s no money. It’s an essential service, we don’t charge sick people more to use the health system or levy higher rates on heavy electricity users.
As with the renewables rollout, which is floundering now because governments of all persuasions thought the market could do it for them, essential public infrastructure has to be funded and governed from the top.
Universal charge km x weight charge as per AEVA makes sense. Note that vehicle damage to roads is not a linear – double the axle weight causes 16 times the damage.
There HAS to be a pollution charge. It can’t continue to be totally socialised given we all don’t drive polluting vehicles anymore but EV drivers still pay the socialised cost of pollution.
I think congestion sorts itself out on an inconvenience basis (as long as we have sufficient public / active transport to provide an alternative, but only if we are not building more roads to deal with it. New roads = congestion charge. Electronic tolling can make this a very easy matter.
The big problem here is that absent commonwealth legislation, the states can’t do this so we need an accord with the feds to make this happen and perhaps finally have a direct link between road use and the charges applicable to it.
As an EV owner I am OK with a road user charge as long as it is equitable and the money raised is all spent on roads.
A charge based on weight and distance travelled seems fair but only if it is applied equally to all road users including trucks.
The excise on petroleum fuels could be reduced and in decades to come phased out as it disappears from general use and becomes pointless.
The big problem with this arrangement though is how does the distance travelled by all vehicles get accurately recorded and reported.
That road and car taxes pay more in general revenue than is spent on road is false.
The road lobby is at work again.
The Victoria public transport users association (PTUA) calculates that Australia pays 69 billion into the road system (including externalities such as road trauma and noise) and collects 45 billion.
https://www.ptua.org.au/myths/petroltax/
Part 1 of 2
A core principle of environmental policy should be that polluters bear the full cost of the negative externalities they create. To this end, I support a broad-based tax on all emissions, whether they affect air, water, or land. This approach moves beyond the scope of a traditional fuel or carbon tax, applying to all sectors of the economy, including industrial manufacturing, energy production, and agriculture. The tax would be directly tied to the quantity and toxicity of pollutants released, creating a powerful economic incentive for all entities to reduce their environmental impact.
I think the charge should include an emissions component – to pay for the air pollution and health costs:
Emissions intensity X Weight X Distance travelled