Introduction: Strategies to reduce transport emissions
There is an increasingly urgent imperative to rapidly reduce greenhouse emissions in the transport sector. Even COVID-19 in 2020 could not topple transport (more specifically road and air transport) from its position as the fastest-growing source of emissions in Australia, and on current trends set to become the largest source in absolute terms, given the steady decline in emissions from electricity generation.
Given the sheer scale of the problem and the urgency of climate action, Australia’s governments should be supporting the Australian people to employ every tool in the transport emissions-reduction toolbox for maximum effectiveness. Fortunately, there is a wide variety of tools available, with proven efficacy. They include:
- measures to vastly improve the attractiveness and safety of walking and cycling, particularly for the shorter local trips that account for the majority of all travel;
- improving public transport to encourage mode shift from low-occupancy cars to high-occupancy trains, trams and buses with vastly reduced energy use per person;
- making the most of the renewed interest in work-from-home arrangements and teleconferencing to reduce the volume of work-related travel;
- reforming Fringe Benefits Tax arrangements that discriminate in favour of salary-packaged cars, parking and petrol, and against public transport, walking and cycling, and electric-powered transport;
- building on prior urban planning successes to promote patterns of urban development that encourage ‘gentle density’ and bring amenities and services closer to where people live; and
- boosting the role of rail freight with dockside links and intermodal hubs to improve energy efficiency in goods transport.
It should not escape anyone’s attention that all these tools have beneficial side effects besides emissions reduction. By reducing our heavy dependence on cars and trucks they promise to improve urban amenity and the accessibility of transport services, and make our streets far less dangerous environments. They are genuine ‘no regrets’ measures that should be pursued even if there were no mandate to reduce greenhouse emissions.
In parallel, of course, it’s of equal importance to target the remainder of energy-intense, fossil-fuel-powered transport that cannot or will not shift to alternatives, and prioritise its conversion to zero-emission technologies through appropriate incentives. The Intergovernmental Panel on Climate Change calls this the “avoid, shift, improve” pathway to emission reduction: seek measures that avoid the need for travel or shift it to lower-energy modes, but then use technological improvements to drive down the remainder of unavoidable emissions. While these improvements won’t reduce transport emissions fast enough by themselves, they are important as part of the comprehensive package of emission reduction measures that will be needed.
Electric vehicle (EV) substitutes for conventional cars, buses, trains and trucks with internal combustion (IC) engines have reached a point of technological maturity where they are making substantial inroads in vehicle fleets overseas. It’s also increasingly feasible to dedicate new renewable electricity sources to charging EVs, and in the immediate term, to take advantage of the substantial surplus in renewable electricity generation outside peak demand periods to bring EVs closer to true zero-emission operation.
The main barriers to EV adoption are the still relatively high upfront cost, and the presence of supporting infrastructure. Although the experience with EVs internationally is that most charging for routine travel occurs at home and at workplaces using dedicated private facilities—something not practical for IC vehicles—the relative absence of public charging networks can be a deal-breaker for longer-distance travel. While less common, the ability to travel long distances occasionally (particularly for holidays) is something Australian vehicle owners take for granted. Thus, one of the most clear-cut and unobjectionable measures for Australian governments to help drive EV adoption is direct financial and in-kind support for the rollout of EV charging infrastructure. This should be backed up by uniform standards for the chargers themselves, that align with global industry efforts.
Another important measure governments can take is the adoption of strong energy efficiency standards for motor vehicles, that would prompt manufacturers to boost their EV marketing efforts in Ausralia. At present, our lack of any substantial efficiency standard for motor cars (almost unique among OECD nations) arguably encourages multinational car companies to use Australia as a ‘dumping ground’ for inefficient IC vehicles that cost them less to manufacture. Backed up with measures such as electrification of large government car fleets, this would boost the presence and visibility of EVs in the Australian car market, including the important second-hand market.
But should governments also provide direct financial support to EV buyers to help offset still-high purchase prices? This is less clear-cut. On the one hand, there’s a clear analogy with the direct support provided to purchasers of residential solar panels, that helped drive the substantial drop in prices over the past decade. It has to be remembered, though, that a household installing solar panels imposes little cost or inconvenience on others. It’s quite different with private car use, because—electric or not—putting more cars on the road has negative knock-on effects for motorists and non-motorists alike.
Subsidies to vehicle purchasers have none of the beneficial side effects of the measures above in making cities less dependent on private car travel. Instead there’s a danger the subsidy, like a drop in petrol prices, drives an increase in car traffic with negative consequences for congestion, road trauma, walkable environments and even pollution (since toxic particulates arising from tyres, brake linings and road surfaces arise just as much with EVs as with IC vehicles). This is even more true of the various ‘boutique’ incentives provided in some countries like Norway, such as giving EV owners free parking privileges or allowing EVs to use bus lanes. In Norway this has been balanced with initiatives such as banning cars in Oslo’s city centre and rolling out a network of bike lanes, that explicitly redistribute road space from motorists to other uses. (Thus, many of the bus lanes that EVs are given preferential access to are actually former car lanes reallocated following reductions in traffic after 2015.) But in the absence of serious measures to reduce car dependence, EV incentives that chip away at the necessary supports for alternatives to car use can do more harm by undermining those alternatives than the good they do in promoting fuel switching by vehicle owners.
Operating costs and excise: who pays for road use?
If one compares just the operating costs of EVs and IC vehicles—those that motorists have to pay again and again, and not just once—it’s pretty clear that EV users are on to a winner. With IC car fuel economy running at 11 litres per 100km on average (a figure that has barely changed in decades) and petrol prices around $1.20 to $1.60 per litre, the fuel cost alone to run an IC car is typically around 15 cents/km. By comparison, EV cars consume around 200 watt-hours per km and the most efficient can go as low as 110Wh/km (below which we are really talking about motor scooters rather than cars). Charging from one’s own solar panels involves an opportunity cost equal to the feed-in tariff of typically 7c to 11c/kWh, while in the worst case charging is at the retail electricity rate which is (using the Victorian default offer as a benchmark) 25c to 30c/kWh. Putting these together gives an EV running cost excluding road charges of between 1 and 6 cents/km, less than half that for a typical IC car even on worst-case assumptions.
Of the 15c/km fuel cost for running an IC car, around 6 cents represents Federal fuel tax (42.3 cents per litre excise tax at the time of writing, plus 10 to 15c/litre in GST). With this charge, the Federal government collects around $12 billion per year in revenue, and this represents by far the largest ‘road-related’ revenue source attributable directly to road users.
As another page explains in detail, this tax is not formally dedicated or ‘hypothecated’ to road construction and maintenance, and comes nowhere close to matching the well over $20 billion that Australian governments spend each year on roads. What it does represent is a contribution by road users to the revenue ‘pot’ from which governments must draw to fund a road system used predominantly for private car transport. Every dollar contributed directly by road users in this way means one dollar less that has to be raised from those who do not derive the same benefit from the road system—from those who seldom drive, whether they are habitual walkers, cyclists or public transport users, or have less need or desire to go places, or are already disadvantaged in their access to transport services.
It is these non-driving or ‘car-light’ populations we should have in mind when it is proposed that EV users (whose use of the road system is expected to be no less than if they were driving an IC car) make a partial contribution to replace the 6c/km they are not required to pay in fuel tax. As of July 2021 the Victorian government levies a 2.5c/km charge for EVs (calculated annually on odometer readings), with the South Australian government planning to follow suit in 2022 and the NSW government proposing a similar charge to apply from 2027. These charges increase the on-road operating cost of an EV to between 4 and 9 cents per kilometre—still a sizeable discount on the 15 cents paid for driving a typical IC vehicle.
The Claim: EV owners already contribute more
The levying of a road user charge for EVs to (partially) replace petrol tax drew substantial concern from EV advocates and environmentalists when first announced by SA and then Victoria in 2020. There was a good deal more to this than just special pleading: a principled objection was raised that governments were imposing extra ownership costs on EVs when—it is alleged—EV owners can already expect to contribute more in tax revenue than IC vehicle owners.
The source of this claim is a 2020 report produced by accounting firm EY for the Electric Vehicle Council (the peak body for the EV industry). The purpose of this report was not actually to highlight the tax impost on EV owners so much as to argue the value of the EV industry to the Australian economy. (As such it’s a valuable corrective to the ridiculous claims made by government MPs during the 2019 Federal election campaign that the Labor opposition’s electric vehicle support measures would “end the weekend”.) But its claim that EV purchasers contribute more than IC purchasers to public revenue has fed the notion that EV owners are overtaxed—contrary to the picture of big operating cost savings laid out above.
The EY report acknowledges the incremental operating costs of EVs are substantially lower than for IC vehicles. Instead, it’s argued EV owners are hit more by the fixed costs of ownership—the various charges imposed by governments when purchasing and registering the vehicle.
GST on capital, [Luxury Car Tax], stamp duty and registration marginally offsets lost fuel excise and GST revenue on fuel ($0.003/km difference) while indirect income tax effects from shifts in employment had a minor net benefit (0.001/km). This is predominantly due to a $15,000–$25,000 price differential between equivalent ICEV and electric cars (not representative of extra luxury) as well as EVs incurring additional registration costs due to a heavier mass from the batteries.
—EY Australia. Uncovering the hidden costs and benefits from Electric Vehicles (2020), page 8
Unpacking the Claim
To test the claim, we have worked through a real-world example based on one of the comparisons in the EY report, namely between ownership costs of a Nissan Leaf (EV) and Toyota Corolla (IC). Of the direct comparisons in the EY report this is considered the most relevant to the ‘mass market’ end of the spectrum. (This point is important: while high-end luxury cars account for a relatively high proportion of EV purchases today, this pattern will clearly not be sustained once EVs account for a substantial proportion of all car purchases.)
In contrast to a flat charge per kilometre for EV users, the tax paid to operate an IC vehicle depends on its rate of fuel consumption, which notoriously varies from user to user and depends not only on the model of vehicle but also on how it is used. To provide realistic figures that reflect actual conditions for the Australian motoring population, the comparison is developed for an IC ‘reference vehicle’ that uses the popular Toyota Corolla as a price benchmark and is alternately assumed to have fuel consumption 10% or 33% below the Australian fleet average of 11.1 litres/100km. (This is the average stated in the ABS 2020 Survey of Motor Vehicle Usage and is for passenger cars only, excluding light commercial vehicles such as utes and 4x4s. As another page explains, manufacturer-reported fuel consumption figures based on laboratory tests severely underestimate real-world consumption.)
Our example is developed based on purchasing and registering the two cars in Victoria, and using purchase prices (ex GST, based on internet searches in late 2020) of $23,000 for the IC vehicle (Toyota Corolla benchmark) and $50,000 for the EV (Nissan Leaf benchmark). These prices were confirmed from internet searches in early 2021, and build in the premise of the EY report that the price differential for EV and IC cars in the same class is in the order of $25,000.
We factor in usage charges as above: for the IC vehicle, tax plus GST in c/km based on assumed fuel use in litres/100km, and for the EV, a fixed 2.5c/km Victorian state levy plus 0.5c/km GST on 5c/km of (grid) electricity. (Thus the assumed total charge in electricity plus tax for the EV is 8c per km, equivalent to paying around 70–80c/litre for petrol for an IC vehicle.) Total ownership costs are calculated assuming a notional 10 year lifetime driving 12,600km per year (the figure for passenger cars in 2018 from the ABS Survey of Motor Vehicle Usage). Administrative charges that apply equally to all passenger cars, such as transfer fees, are excluded from the calculation.
The results of the comparison differ somewhat from those obtained by EY, and are summarised in the table below, with and without the $3000 EV subsidy also introduced by the Victorian government in 2021. Subsequent sections set out the details of the calculation.
|Reference IC vehicle
|Fuel use relative to fleet average||10% below||33% below|
|Taxes and charges||($)||($)|
|GST on purchase||5000||2300|
|Stamp duty on purchase||2100||966|
|Luxury Car Tax||0||0|
|Registration x 10 years||7348||8348|
|Fuel excise and GST||0||6960||5180|
|Victoria road user charge||3150||0|
|GST on electricity||630||0|
|Total government charges||18,228||18,544||16,794|
|Charges with $3000 EV subsidy||15,228||18,544||16,794|
We conclude that even after factoring in Victoria’s road user charge, and ignoring the $3000 EV subsidy, the owner of an IC vehicle with fuel economy near the Australian fleet average is taxed slightly more than the EV owner, even though the EV is the more costly purchase.
Only if the IC vehicle’s fuel economy is substantially better than the Australian average does the higher cost at purchase tip the balance—in this example by $1434 over the vehicle lifetime. This amounts to less than half the current Victorian EV subsidy, and to about 5% of the $27,000 difference in purchase price between the EV and IC car, which is still the real deterrent in this situation.
EY’s report came to a stronger conclusion—not borne out by our calculation—that EVs were taxed more even in the absence of a road user charge for EVs (hence the charge would only add to the alleged disadvantage of EV owners at the hands of the state). It did so for two main reasons:
- All revenue contributions in the EY report were treated in aggregate, including Luxury Car Tax which only applies to vehicles at the top end of the market. The LCT contribution was calculated on the assumption that 50% of all purchases would attract LCT, which (as noted above) may apply to the current market environment but cannot be extrapolated to a future where EVs account for more than a small proportion of purchases. Although EY mention that a ‘low case’ was calculated similar to that presented here, only the average of this and the top-end ‘high case’ was reported.
- The report assumed NSW policy settings throughout for government charges. Notably, NSW calculates annual registration fees based on vehicle weight, which means that EVs cost more to register than equivalent IC vehicles due to the added weight of the batteries. Only NSW, WA and the ACT calculate registration fees based on gross weight, with other states applying different methodologies. Victoria in particular provides a $100 discount on annual registration for EVs. It is important to view Victoria’s road user charge in this context: the discount effectively provides a 4000km ‘tax free threshold’ that is not available to IC vehicle owners.
As the above example shows, the $3150 in road charges over 10 years brings the EV’s tax bill on par with IC vehicles, but it doesn’t leave the EV more heavily taxed than the general population of IC cars. It also shows that if governments wanted to give EVs a clear tax advantage there are many ways of doing so without abandoning the idea of a road user charge. A further moderate discount in fixed annual registration, for example, would easily give EVs a tax advantage even in comparison with very efficient IC vehicles. The Victorian government’s $3000 purchase subsidy likewise almost entirely offsets the expected usage charges over 10 years.
The following sections look more closely at the various ownership charges levied by governments and how they relate differently to EV and IC vehicles, before drawing some general conclusions.
Luxury Car Tax
Luxury Car Tax, or LCT, came into existence with the Howard Government’s tax changes in 2000. Prior to this, a ‘progressive’ scale of sales tax applied to vehicle purchases: a lower ‘Schedule 3’ rate of 22% for the majority, and a higher ‘Schedule 6’ rate of 45% for vehicles at the high-price end of the market. In 2000, the lower rate was effectively replaced by the 10% GST, and LCT was invented to partly replace the extra revenue obtained from the higher Schedule 6 rate. (The overall change was not revenue-neutral though, and indeed there was a substantial drop in new car prices across the board in 2000.)
Economic rationalists take a dim view of LCT and other ‘luxury taxes’ as they are held to distort the free market by applying tax selectively to particular goods desired by people with specific tastes. Accordingly there have been many proposals since 2000 to abolish LCT, including in the 2009 Henry review. It remains true however that LCT represents a substantial concession on the tax arrangements that existed before 2000, and that high-end motor vehicles remain among the most prominent ‘positional goods’ sought by the wealthy. According to the Tax Office, LCT consistently raises around $700 million a year in revenue which would otherwise have to be replaced from other sources.
LCT features prominently in the EY report due to its high incremental rate of 33 cents for every additional dollar of purchase price. Taking as an example EY’s ‘high case’ comparing two models of the Audi 55 quattro—the IC model selling for $129,000 and the EV model for $158,000 based on a simple internet search in 2020—the $29,000 price difference equates to an extra LCT liability around $6600 (after accounting for the difference in tax thresholds, see below). EY’s methodology effectively averages the high and low cases to determine the tax liability in a fictitious ‘average’ case, meaning an extra LCT liability of $3000 or more is attributed to any EV purchaser whether their car is liable for LCT or not.
In partial recognition of the price disparity that currently exists between equivalent EV and IC car models, LCT has a higher threshold for ‘fuel efficient’ vehicles (a broad category that includes most EVs). For 2020–21 the threshold is $77,565 for efficient vehicles and $68,740 for others. LCT only applies to the amount above the threshold, and then only to the equivalent ex-GST value. As noted above, ‘mass market’ EVs such as the Nissan Leaf can be bought new for amounts well below either threshold.
GST and Stamp Duty
There are two forms of tax that apply to all vehicle purchases in Australia regardless of value: the 10 per cent GST (collected by the Commonwealth but notionally attributed to the states) and the vehicle transfer duty (commonly known as stamp duty) levied by the various State and Territory governments. Rates of the latter vary by jurisdiction, and different rules apply as to whether EVs and other ‘efficient’ vehicles are charged concessional rates.
In Victoria in 2020–21, the effective rate of stamp duty is 4.2 per cent. Higher rates on a sliding scale apply to cars at the higher end of the market, but EVs (with no tailpipe emissions) and other low-emission vehicles (with CO2 emissions below 120g/km) are exempt from these higher rates. By comparison NSW, SA and Tasmania have rates of between 3 and 5 per cent (depending on value); however, both NSW and Tasmania have waived stamp duty entirely on EVs as of 2021. WA’s rate is between 2.5 and 6.5 per cent with no EV concession. The NT applies a flat rate of 3 per cent, but as of 2022 there is a $1500 discount for new EVs, effectively eliminating stamp duty for EVs under $50,000. Queensland has a sliding rate from 2 to 4 per cent for hybrid and electric vehicles, and 3 to 6 per cent for others depending on engine size. Lastly, the ACT applies different rates of stamp duty based on environmental performance as reported in the Federal government’s Green Vehicle Guide; most EVs will qualify for a zero rate under this scheme.
Fixed annual charges for registered motor vehicles (collectively known as ‘registration fees’) are calculated differently in each State or Territory, and may or may not depend on characteristics of the vehicle. This is in part because different jurisdictions take different philosophical approaches to the dual purpose of registration fees: on the one hand as a revenue source to fund road maintenance, and on the other as a way to fund personal injury compensation and treatment for car crash victims.
In Victoria, the way fees are structured emphasises the second of these purposes, with the bulk of the fee deemed a TAC insurance premium. The fee for cars is charged on three tiers based on postcode of registration, with the highest (for metro areas) being $834.80 in 2020–21, and the lowest (for rural areas) being $716. As stated above, there is a $100 discount for zero and low-emission vehicles. (Until 2021 there was a similar discount for ‘conventional’ hybrids that use an electric motor to improve the efficiency of an IC engine; while this has been discontinued, the discount remains in place for other low-emission cars.) This alignment of the registration discount with the same vehicle categories that are liable for the kilometre charge makes it practically equivalent to a 4000km tax-free threshold, as noted above. There are no other variations based on vehicle characteristics in Victoria.
Although Victoria’s charges have multiple tiers, they are simple by comparison with the charging regimes in other jurisdictions. NSW and the ACT charge on a sliding scale based on vehicle weight and whether the vehicle is primarily for personal or business use. This reflects the first purpose above—of registration as a road maintenance levy—given the very strong link between weight and the amount of damage vehicles cause to road surfaces over time. As already noted, this imposes a penalty on EV owners due to the additional weight of EV batteries; the fee increment at each weight threshold above 1.5 tonnes is between $150 and $200 a year (for personal use), which is a similar order of magnitude to the typical liability of an EV owner under the Victorian or SA road user charge. Both NSW and the ACT do however compensate partly for this by providing discounts on registration for EVs and other low-emission vehicles, the ACT discount of 20% being the more generous. The ACT government also provides two years’ free registration after purchase for EVs, honouring an announcement in 2020.
In South Australia, registration fees vary according to vehicle body type, engine capacity (number of cylinders) and place of registration (similar to Victoria), but not by the gross weight of the vehicle. Queensland’s and Tasmania’s systems are similar, with a sliding scale based on engine capacity combined with a fixed insurance premium.
WA’s system combines a fixed insurance premium with a weight-based fee similar to NSW’s, but with a finer scale of $23.64 per 100kg of vehicle weight (as of 2020–21). Thus a typical EV battery pack weighing (say) 500kg will add $118 to the registration fee in WA, which is somewhat lower than the typical increment in NSW for crossing a weight threshold, but still contrasts markedly with Victoria’s practice of giving a $100 discount for EV registration.
Lastly, the Northern Territory has a sliding scale of fees based on engine capacity in cc and number of cylinders. However, they also declare a specific fee for all EVs (up to 4.5 tonnes vehicle mass) which matches that for light vehicles between 501cc and 1000cc engine capacity, representing a substantial concession compared with a vehicle of equivalent engine power. As of 2022, part of the registration fee is waived for EVs for the first five years.
Conclusion: How much imperfection is tolerable?
Actual calculations, based on correct assumptions for the jurisdictions in which kilometre charges for EVs apply, suggest that EV owners are not overtaxed relative to owners of equivalent IC vehicles.
But the claim EV owners pay more tax is compelling because it does contain a grain of truth. If one considers only the fixed charges for owning the vehicle, EV owners are likely to pay more in government charges than IC vehicle owners. This cost is however recovered—many times over—in operating cost savings, and the imposition of a modest road user charge as in Victoria or SA does not substantially change this calculation. Only in comparison to the most fuel-efficient IC vehicles in the market could EV owners be said to be at any disadvantage, and these are not the IC vehicles Australians are most inclined to buy. A few percentage points either way in total ownership costs is not what typically drives the critical purchasing decision.
Apart from in NSW or WA where the weight of EV batteries adds to annual registration fees, the additional fixed costs are entirely attributable to the higher purchase price of EVs relative to IC vehicles with equivalent specifications. As the industry points out, the overall cost savings with EVs—not just lower fuel costs but also reduced maintenance costs due to the much simpler drivetrain—means that in terms of total ownership costs, EVs should reach parity with IC vehicles much sooner than raw purchase prices would suggest. But the higher purchase price nonetheless acts as a barrier to non-enthusiasts in the car market.
The challenge then is to introduce carefully designed support measures for EVs that encourage mass-market adoption, but without using public money to add cars to the road or add to car dependence with poorly-targeted subsidies. As noted at the outset and also highlighted by the EV industry itself, strong energy efficiency standards that mandate low emissions on a whole-fleet basis are a key factor behind take-up of EVs in international markets. There are increasing calls for the introduction of such standards at a national level in Australia (where currently there are none), including in December 2020 by the South Australian government and in May 2021 by the Victorian government.
South Australia produced an EV plan in late 2020 that will mandate EVs for government fleet purchases, and has an aspirational target of all passenger car purchases being EVs by 2035 (although as a sub-national jurisdiction it is not in a position to mandate this). Victoria likewise will add 400 zero-emission vehicles to its government fleet by 2023, will roll out publicly funded charging stations alongside the aforementioned $3000 subsidy for EV purchases, and aims for half of all new car sales being zero-emission vehicles by 2030. Both strategies provide important context for the introduction of a road user charge for EVs in these jurisdictions in 2021 or 2022. In SA’s case, this is explicitly seen as part of a wider tax reform strategy involving Federal and State governments.
Introducing direct road user charging as a replacement for fuel excise tax has been recommended at high level numerous times in Australia, including by the Productivity Commission in its 2017 Shifting the Dial report, and more recently by Infrastructure Victoria. Importantly though, the push gains added weight with the anticipated transition from fossil-fuel to electric vehicles. While IC cars were the norm, replacing fuel excise with direct user charges could be seen as just marginal tinkering with comparative contributions by different motorists, of largely theoretical value to the economic rationalists proposing the measure. As long as every motorist was contributing to revenue with each additional litre of fuel, it could be argued that fuel excise was a simple and efficient—if imperfect—method of charging for road use in proportion to the volume of travel.
A transition from IC vehicles to EVs changes the calculus radically. Without some form of direct user charge, EV motorists make no per-kilometre contribution for road use analogous to that implied by paying tax on fuel. The $12 billion of annual revenue from fuel tax will need to be replaced from some other source, and it is arguably unjust to expect the car-free and car-light to substantially increase their own funding contribution to a road system that is predominantly built and used for private car travel (with freight use accounting for less than 10% of overall traffic volume). It is no doubt awkward that as things stand, there will be different levels of government collecting revenue from users of different types of vehicle—Federal government from IC cars and the States from EVs—but the old saying surely applies here, about not letting the perfect be the enemy of the good.
Indeed, to take the idea slightly further, kilometre charges for road use can also be used by states to reduce fixed ownership costs such as registration fees. There is a strong argument that levying high recurrent annual fees for owning a car, regardless of how much it is used, acts as a distorting incentive for additional driving to justify paying the high annual fee. Virtually all the negative effects of mass car and truck use—not just polluting emissions but also death and injury, congestion, noise and the blighting of liveable neighbourhoods by road traffic—scale according to total vehicle kilometres, so it is quite economically rational that charges for owning and using cars should scale with kilometres driven as well. Jurisdictions considering a road user charge, including NSW in the longer term, could consider parallel adjustments to annual registration fees for EVs similar to those that apply in Victoria (which in NSW’s case would also compensate for the effect of EV batteries on the fee calculation).
At the same time, there are justifiable concerns about the manner in which road user charging schemes are implemented and administered. Attention has been drawn to the way the Victorian and SA schemes adhere closely to a 2019 template proposed by Infrastructure Partnerships Australia, a toll-road lobby think tank (not to be confused with the Federal advisory body Infrastructure Australia, notwithstanding there is some overlap in key personnel). It meshes nicely with the road lobby’s ideal road-funding scenario, where fees are collected directly from motorists (ideally by a privatised toll collector at arm’s length from government) and paid into a special fund dedicated to road construction, neatly providing a guaranteed multi-billion-dollar recurrent revenue stream for road builders. This contrasts with the present situation where—at least notionally—all road-related revenue and expenditure passes through governments’ consolidated revenue funds and requires authorisation by the people’s representatives in Parliament.
It is of vital importance that road user charging schemes are administered by government—in the same way that vehicle registration still is—and that the funds be directed to consolidated revenue to be spent as Parliaments determine. In the current political environment, there is no danger that any such road user funds will not ultimately be spent on roads. But in principle, there is no reason that funds raised from motorists, and transport users in general, should not be applied to the sustainable transport emission reduction measures listed right at the outset, given the benefits to existing travellers and the environment alike from reducing car dependence.
Last modified: 27 November 2021