Govt looks to RUC in road funding shake-up

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Land transport funding in New Zealand is becoming “unsustainable” through current models and change is needed, leaders say.

Transport minister Phil Twyford and opposition transport spokesperson Chris Bishop both agree that ditching a fuel tax and introducing road user charges (RUC) for all vehicles, including EVs, is the way forward.

The National Party recently unveiled its vision for such an idea in its pre-election discussion documents.

Motorists currently pay 66 cents per litre of petrol in tax which goes into the NLTF for land transport and roading projects.

“Fuel use is becoming a poor estimate of road use as vehicles become more modern and fuel-efficient,” Bishop says.

“The common use of hybrid vehicles by taxi and ride sharing services effectively reduces the contribution these drivers make to road investment, while electric vehicle users currently pay no road user charges at all,” he says.

Road user charges would be phased in over the “medium-to-long term” with the use of technology, according to the discussion documents.

The EV exemption from RUC is due to be lifted on December 31, 2021, but it’s uncertain if the date might be brought forward.

Meanwhile, Twyford says he agrees with the idea of RUC for all and he welcomes the opposition’s support on the initiative “to help provide certainty to drivers in the long-term”.

“Funding our transport system is a problem we need to address in the future as people increasingly move to electric cars and other forms of transport,” Twyford says.

“We know that other countries are grappling with the same problem and are looking for solutions.

“That’s why I’ve asked the Ministry of Transport to do some initial work looking at replacing fuel excise with GPS-based road user charges which would be phased in over the long-term.

“This work is still at a very early stage and I have yet to receive any advice on the implementation and design of such a system.

“We are looking to support Kiwis buying vehicles that are better for the environment and cheaper to run through our clean car policies.

“They will result in a wide variety of cleaner cars, utes and vans being available and affordable for Kiwi families and businesses,” Twyford says.

The Government’s proposed clean car policy was first announced by associate transport minister Julie Anne Genter in July last year and will see the price of utes and SUVs go up.

The Toyota LandCruiser, for example, will be $3000 more expensive, the Mitsubishi Triton will jump by $2500, the Ford Ranger will be $2750 more, and the Toyota Hilux will increase by $2000.

For new or near-new plug-in cars, battery electrics would receive an $8000 rebate, plug-in hybrids $6800 and hybrids $4800.

“Most Kiwis want to buy a car that’s good for the environment, but tell us the upfront cost and limited choice makes it a challenge.

“This is about making cleaner cars a realistic choice for more New Zealanders – by reducing the upfront cost of electric, hybrid and fuel efficient vehicles when sold in New Zealand for the first time.

“These policies are expected to save the country more than $3.
4 billion in fuel and result in fuel savings of more than $6,800 over the lifetime of an average vehicle,” Genter says.

Congestion charging needed

A recent report by New Zealand Initiative research fellow Dr Patrick Carvalho says New Zealand’s current transport system “falls far short” and funding is at the heart of the problem.

The report shows that without proper road user pricing, congestion is becoming “the new normal” in urban centres, costing the economy over a billion dollars every year.

New Zealand is among the top 10 countries for vehicle ownership per capita and without suitable policy action, road congestion is “all but certain to intensify”.

Government forecasts also show that New Zealand’s total vehicle kilometres travelled might increase by as much as 66% by 2040.

However, road user charges (RUCs) which already apply to diesel vehicles still fail to price congestion costs and this needs to change, Carvalho says.

“The solution requires the introduction of congestion charging, which charges drivers higher road user rates at peak times in overcrowded routes,” he says.

The study says this will lead to benefits such as efficient use of roads; shorter, safer and more reliable trips; higher productivity and wages; a source of valuable information for future transport investments and financial incentives for other modes of transport (public buses, cycling, walking).

“Introducing congestion charges can encourage commuters to find trip alternatives, such as other travel times, routes and transport modes.

“That would reduce the overuse of road services at peak times.

In return, to avoid congestion charges becoming ‘just another tax’, commuters should expect the government to commit to a revenue-neutral system – where every net dollar raised through congestion charges would be offset by, say, a dollar less through property rate collection or lower fuel prices.

“Variable peak and off-peak rates are already part of our daily lives, from electricity bills and cinema tickets to hotel rates and public transport fares.

Why should it be any different with car use?

“In a sense, we are already paying for congestion through hours wasted idling in traffic jams every week.

“Instead of Soviet-style rationing of road space by widespread queuing, congestion charges would harness the power of the markets to solve our daily, and costly, road bottlenecks,” Carvalho says.

EROAD ready to deliver

New Zealand-based transport technology company EROAD is one company that is well placed to take advantage of any moves to introduce a wide-ranging RUC system.

The company is a pioneer of the technology which has so far collected NZ$2.5 billion for the New Zealand Transport Agency and delivered safety benefits to many commercial fleets.

Around 46% of heavy vehicle road user charges in New Zealand are now collected through EROAD.

“EROAD pioneered regulatory telematics through developing a technology platform that is reliable, accurate and easy to use,” founder and chief executive Steven Newman says.

“Because of this, our global relationships with those researching or trialing road funding or safety regulations have continued to expand, and we have invested in scalable systems and processes that can deliver holistic solutions for any government wanting to achieve a safe, sustainable and productive transportation system,” he says.

EROAD says it’s ready to assist with any road funding changes and noted they have already consulted with leaders in other countries considering such shifts.

Late last year the company spoke to industry and institutional specialists from over 50 countries about such systems at a convention in Las Vegas.

One advantage New Zealand has in developing and shifting to such a system is that it’s a technology and software leader in the space, with companies such Teletrac Navman and Coretex also leading the way.

Singapore a success

Singapore has been charging for the use of road at peak hours since 1975, and continues to laud such work as a success with its ‘Electronic Road Pricing’, or ERP system.

The price of driving on a road rises when speeds drop below 45km/h on expressways, and 20km/h on arterial routes.

However the system is actively managed to ensure at least 85% of motorists are travelling at speeds above the threshold.

A next-generation ‘ERP2’ system is coming, based on GPS rather than radio frequency tags, that will ensure drivers pay for the distance travelled on a road rather than just that they have used the road.