New Zealand's next steps to road user charging for all vehicles UPDATED

I've written twice before (here and here) about the policy announcement from the New Zealand (NZ) Government around introducing road user charging (RUC) for all vehicles.  This was a policy commitment by the National Party-led coalition government after it was elected in 2024.

On 6 August, Minister of Transport, Hon. Chris Bishop, has made a further announcement about this.

On the face of it, it looks like following Iceland to become the second country in the world to phase out fuel excise duty (FED) in favour of charging vehicles for road use by distance and vehicle class. For those who know about NZ's RUC system I don't want to go into detail as to how it works now (there is a Handbook with information here published by the NZ Transport Agency which manages the existing RUC system), but here are some very quick points for those unfamiliar with it.

NZ's RUC system

In NZ motor vehicles registered to use public roads either pay based on consumption of a taxed fuel (petrol/gasoline, LPG and CNG) or on distance based on vehicle class (RUC).  In summary (I've omitted some details that are inconsequential, for the sake of pedants):

• All RUC and Fuel Excise Duty revenue is hypothecated into the National Land Transport Fund (NLTF), which is used by the NZ Transport Agency (NZTA) (along with revenue from motor vehicle registration and licensing fees, and direct government funding from the Crown) to fund the National Land Transport Programme (NLTP), which is central government's funding of roads, public transport, walking and cycling infrastructure, rail and coastal shipping.
• RUC rates are informed by a cost allocation model applying economic and engineering principles to future NLTP spending.

Depiction of how New Zealand's RUC rates are based on cost allocation

• 1.2 million vehicles in NZ are subject to RUC. This includes all heavy vehicles regardless of fuel source (vehicles with a Gross Vehicle Weight of over 3.5 tonnes) and all light vehicles that are diesel, electric (EVs) or plug-in hybrids (PHEVs). Around 80% of vehicles subject to RUC are light vehicles.
• RUC raises NZ$2 billion (US$1.19 billion) per annum in net revenue, which is around 40-45% of the revenue to the NLTF. Fuel excise duty raises around the same from petrol powered light vehicles only.
• The RUC system comprises prepaid distance licences, either paper or electronic.  The rate structure for RUC varies by vehicle class and weight, based on a cost allocation model that allocates future spending based on the consumption of that spending by vehicle class/weight.
• Over 95% of light RUC vehicles and a majority of heavy RUC vehicles are on the "manual system". This means regular checking of the paper RUC licence against odometer (hubodometer for heavy vehicle) readings, and purchases of new licences in blocks of 1,000kms or more either online or at retail outlets.  Once purchased the new RUC licence is issued and is typically displayed on the vehicle windscreen in the bottom corner.  At regular safety inspections, the odometer reading is recorded by the inspector and forwarded to NZTA to check against the latest distance licence.

Sample RUC distance licence as displayed on windshield

• Over half of heavy RUC revenue is raised through eRUC system providers:  Three companies offer eRUC, with electronic distance recorders that measure distance matched against locations, primarily for commercial vehicle fleets to more efficiently manage RUC and their vehicle fleets. These companies collect revenue for NZTA at virtually no cost to government, and attract commercial vehicle fleets due to the convenience of billing them for all vehicles, rather than monitoring and buying RUC licences for each vehicle.  The three companies are telematics providers (EROAD, Teletrac Navman and RUC Monkey).  The market for these systems was legally established in 2009.

Teletrac Navman electronic hubodometer

 

Early EROAD distance measurement device

• Electric and plug-in hybrid light vehicles were added to the RUC system in 2024. This was around 120,000 vehicles with over 95% compliance.
• Heavy vehicles are required to have either hubodometers or electronic distance measurement devices installed to be registered. This includes all heavy trailers, in order to capture variations in vehicle configuration that affect applicable RUC rates.

Hubodometer as required to be installed on all registered heavy vehicles

• Distance travelled off public roads is not subject to RUC. Vehicles with eRUC automatically have off-road distance not measured to avoid consuming RUC, owners of vehicles on the manual system may apply for refunds through a manual (and time consuming) process.  The same applies to petrol powered vehicles operating off of public roads and any other equipment using petrol. It is possible to apply for refunds of FED, but many do not do so because of the time and complexity required.
• NZ has an Emissions Trading Scheme, which sees a cost of CO2 emissions included in the price of fuels used domestically in NZ. FED has never been designed to be an environmental tax, noting there is no FED on diesel.  FED is a proxy road user charge.

What's the objective?

Revenue sustainability and fairness.

While FED is a very cost effective way of raising revenue, the variations in what petrol vehicle owners pay are considerable based not only on engine size but engine type.  Although EVs are on RUC now, as are PHEVs (at a reduced rate to reflect their use of petrol), battery electric hybrid vehicles (BEHVs) and small fuel efficient petrol vehicles are paying much less per kilometre to use the roads compared to the average petrol powered car.  There are already 350,000 BEHVs effectively paying half as much as all other light vehicles to use the roads.

In future years, rates of RUC and FED would both need to increase to reflect inflation and the Government's ambitions for significant capital spending on improved roads. While tolls are to be used to help with some projects, they will not be able to be applied to many capital improvements. Raising FED creates a distributional impact on those unable to afford new vehicles that are more fuel efficient or have different drivetrain technologies such as EVs, PHEVs or BHEVs.  FED is simply no longer fair compared to RUC which can apply a flat rate across all light vehicles to reflect their use of the road network and the spending from the NLTP that benefits them all equally.

Putting all vehicles on RUC means that changes in vehicle technology won't affect revenue and future RUC increases will apply equally to all light vehicle owners, reflecting spending on land transport infrastructure.

What's going to happen?

RUC legislation will be amended:

• to remove the requirement for paper RUC licencesa and prepaid licences.  This will enable RUC to be billed based on past travel, rather than future distance travelled. 
• to enable use of telematics systems already built into vehicles as a means of measuring and reporting distance travelled, rather than simply the odometer or a third-party device.
• Separating NZTA's role as regulator of electronic system providers and provider of the manual RUC system, to remove conflict of interest in encouraging competition in the supply of RUC service provision.
• Allow tolling and future congestion pricing services (time of use charging in NZ parlance) to be bundled with RUC for those choosing to use electronic system providers, to avoid the need for multiple accounts.

The intention is that this should enable a wider range of technical and commercial options to measure, report and bill for RUC.  With the existing market base of around 1 million vehicles on the manual RUC system, the potential should be there for new providers and technical solutions that are cost effective.

The expectation is that by 2027 a next generation of RUC providers and options will be available supplied by private companies, to attract existing RUC users from the manual system and make it easier to transition other light vehicles onto RUC.

No deadline for the RUC transition has yet been set, which is sensible as there are some major issues to work through.

It appears that the manual system will remain and that location will NOT be mandated as part of an eRUC system. This should help address concerns about privacy.

Unanswered questions

While there is a lot of speculation as to what will happen and when, some of the big issues remain to be worked out in the coming years. These include:

• Will the manual RUC system remain in some form? There is an argument to retain it for vintage vehicles and some older vehicles that are not suited for third party devices for various reasons. Furthermore, retaining the manual system will address a raft of privacy concerns for many people, even if it is modernised to be based on reporting distance travelled rather than prepaid distance.  On 7 August the Minister indicated that a manual option will remain for those who want it. 
• How will the transition be structured?  Vehicles using a specific fuel can either be switched all over overnight or in groups, while having some means of exempting, refunding or crediting FED as long as it remains.  There are merits and costs in both approaches, and there should be flexibility around FED to facilitate the latter by technical means.
• Will RUC remain a single national rate for the time being?  The merits of eRUC which includes location are minimal for light vehicles that don't go off road, so the transition raises questions as to wider reform of pricing roads.  On 7 August the Minister indicated that location measurement would not be mandatory.  Given the commitment to more tolls and time of use charging, location will be an option for those wanting to use eRUC as an interface to such systems, but they will remain separate policies. Existing governance structures are almost certainly not going to be able to deliver more disaggregated road pricing by location and time of day efficiently, and there are reasonable concerns as to whether future government may use it to act punitively against certain classes of vehicles in specific locations.  Not mandating location should ameliorate those concerns.
• How is non-compliance going to be managed? There are obvious merits in treating road as a utility, but there are costs too which are born by utilities. These are around customers at the margins of being able to pay invoices and those who seek to evade the system altogether (along with vehicle licensing and safety inspections). Existing RUC compliance is focused on heavy vehicle compliance generally, with one means of checking light RUC compliance, this is unlikely to be adequate for a system that will have 95% of its customers as private vehicle owners.
• How will the market for eRUC service providers be adequately incentivised?  It is not a brand-new market but the market for eRUC for private vehicle owners is almost non-existent under current settings. Some mix of mandating RUC and allowing a wholesaling of RUC may provide the answer to this, but other options may need to be considered, such as revenue sharing.
• Will OEM (Original Equipment Manufacturer) telematics systems be opened up to enable use of data for RUC? Whether by OEMs or by legislation, being able to unlock the potential for these systems (which raises some issues in itself) for service providers to bill vehicle owners, will be important in maximising convenience, compliance and minimising costs.

Assuaging concerns

There may be some work to be done in convincing the public that FED will be abolished and people won't be paying twice. Associated with that will be concerns about RUC being used to raise much more revenue at higher rates, although this was entirely possible with FED (and for many years part of FED revenue was general Crown revenue not hypothecated to the NLTF. This was abolished in 2008 as the Government spending on land transport had been increased considerably, and there had been a successful political campaign for some years to end FED revenue being split between the NLTF and the Crown.  One way of assuaging concern about rates would be to review and update the Cost Allocation Model used to inform the setting of RUC rates, so that it is at least seen as being based on economic calculation to generate revenue for specific land transport spending and not simply political whim.

There is also some concern about privacy, if everyone is required to have an electronic device or system that measures and reports distance by location (which isn't essential if RUC is going to remain a single national rate for some time).  Other concerns are around use of data, especially the idea it might be used for speed enforcement. While it seems highly unlikely that the current centre-right government would want to implement such a policy, it is not inconceivable that a different government which seeks to rigorously pursue a policy of zero road fatalities and to discourage private motoring might use such a system punitively.  The current eRUC system allows fleet operators to be notified if their drivers exceed speed limits, but this is entirely voluntary and does require real time tracking, which is not cheap to implement given data requirements (and is typically applied by fleet operators to ensure that their expensive vehicles and cargos are being protected).  RUC legislation ought to be drafted to ensure that it addresses concerns around privacy and scope creep.

Ultimately this is a revolutionary move, far moreso than any of the US states moving towards RUC for EVs (with the possible exception of Hawaii which IS looking to transition all light vehicles onto RUC by 2033), and more than any countries in Europe, which all struggle to implement RUC on light vehicles. If successful, it will certainly put NZ at the leading edge of RUC internationally.

All of this at the same time as NZ is progressing legislation to enable congestion (time of use) pricing (see the Bill for that here), which is expected to be implemented using automatic number recognition technology in the foreseeable future.

UPDATED: Following a TVNZ news story which included an interview with Hon. Chris Bishop on 7 August which provided further elaboration of his intention, several elements of this post have been amended. 

New York's Lower Manhattan toll has reduced congestion

New York's congestion charge is of course ground-breaking in the United States as the first application of congestion pricing to all lanes on an existing road (of course express lanes have offered the choice of priced lanes in many cities and on many routes, and there are toll roads with higher peak charges, but congestion pricing on previously untolled roads is new).

The scheme has been in place now since 5 January, so is well bedded in. It is timely to look at the results so far.  It is designed primarily to raise revenue, which is why charges apply 24/7 (albeit with a significant discount during 2100-0500 weekdays and 2100-0900 weekends), but that doesn't stop there being a noticeable demand impact.  It should encourage both mode shift and some trip consolidation (fewer motor vehicle trips), and also some time shift close to the 0500, 0900 and 2100 time period cutoffs. 

The conclusion after six months is that traffic flows better, transit patronage is up and there are considerable net revenues being generated from vehicles paying the charge (which unhelpfully is called a toll). 

The National Bureau of Economic Research Digest reports an 8% increase in the speed of car trips within the zone and to the zone, with a 2.5% increase in speeds from the zone. 

New York City traffic speeds

It also noted a 15% in average CBD speeds with a 20% increase in weekday afternoons (1300-1700) and 25% increase in weekend evenings (1500-2100). 

The MTA has published data about vehicle entries and bus travel times.  

In January, there was an 8% reduction in vehicles entering the charged zone compared to the baseline of the previous year. By June 2025 the reduction in vehicles entering the charged zone was at 14% compared to what was forecast had charging not been in place. It was down 10% in May, 12% in April and 13% in March. This is an ongoing trend, which should result in higher traffic speeds as well as improved air quality.

MTA also reports bus speeds. These indicate a modest increase overall compared to previous years, but the effects vary considerably when disaggregated to specific routes. Route B39 sees a 30% increase in speeds, M1 hardly any change, as it is obviously dependent on the impacts on specific routes. 

Route M1 average speeds by month

Route B39 average speeds by month

With a flat fee for all routes, it is obvious some routes will see significant improvements, while others will not (either because they are much less congested anyway, or demand elasticity is different for different origin-destination pairs).

Transit use has gone up. Subway patronage is up 6-8% per month. Long Island Railroad, Metro-North Railroad and bus patronage are also up by similar percentages.

The PATH (subway from New Jersey) has seen patronage increases in all but one month since January of 7-11% per month.

Congestion pricing tracker website is more informative, as you can compare the driving times for a wide range of routes into the zone by time of day and day pf the week.

The Lincoln Tunnel has clearly sees reduced travel times during the day, but the Queens-Midtown Tunnel (which was already tolled) has seen little impact. Arguably in the mornings, there has been an increase, because those paying for the toll of this (and multiple other crossings) have the toll as a credit towards the congestion charge. This suggests some shift in chosen crossing to the tunnel because it is not longer punitively priced compared to the other crossings.

Lincoln Tunnel travel times

                    Queens-Midtown Tunnel travel times

Some of the data shows time shift around peak/off peak charges, but largely involving a slight increase before and after the change in charging times. 

The website's conclusions so far are:

Overall, the policy has mostly reached its intended effects, at least directionally. 

Traffic delays have decreased significantly across the board within the congestion zone, on tunnels and bridges to the zone, and even in the surrounding boroughs. 

While time saved in traffic depends significantly on the route one takes, it has ranged from a few minutes shaved off an evening commute to a decrease of thirty minutes or more. Official MTA data shows tens of thousands fewer vehicles are entering the zone, resulting in reduced crashes and injuries.

Environmental effects have also been apparent: honking and noise complaints have more than halved in some areas of the Congestion Zone, and air quality has reportedly improved.

While long-term effects of Congestion Pricing will continue to evolve over the months and years to come and vary significantly based on individual experience, our current data paints an encouraging picture of the policy’s effectiveness.

Of course reduced travel times/ increased speeds are an obvious measure of success. Those paying are now getting a better experience, with improved journey times and less energy wasted (with lower emissions).  However there is a lot of additional data needed to form a complete picture of the impacts.  What I would hope to see by early 2026 is:

• Route by route average traffic speeds comparing free flow, pre-charging and post-charging 
• Data on what happened to the reduced traffic (mode shift, higher vehicle occupancy, reduced number of trips, diverted trips) based on surveys
• Compliance rates (proportion of vehicles paying the charge compared to those required to pay)
• Complaints rates (numbers of formal complaints about charges)
• Impacts on businesses located within the charging zone, including those relatively close to the 61st Street boundary (some may be winners, some losers if the charge deters some customers)
• Data comparing local air quality within and just outside the charging zone before and after the charge was introduced

Will this encourage more congestion pricing in the USA?

It's too early to tell, but clearly the sky didn't fall in NYC, and there are some measurable and noticeable improvements in travel times and changes in behaviour.  However, lower Manhattan is fairly unique in the United States. With the possible exception of downtown Washington DC, no other US city has a concentration of trips and employment so focused on its downtown that is responsible for much urban congestion (and lower Manhattan's geography lends itself to charging).  

The big mistake will be thinking that the answer for each city will be to implement a cordon as seen in New York, particularly one that runs 24/7. This is the sort of nonsense that was seen when London was introduced, as it was assumed by some that every city just needed an area charge, but no others have ever been implemented.  

New York is, so far, a success. It faces its charges being increased in future years to sustain those benefits, noting New York was introduced at a considerably lower rate schedule than was originally proposed as seen below.  In 2028, the rates are going up by around a third on average, and another 25% in 2030 to meet the revenue targets desired. The impacts of both of those increases will be interesting, because it is likely they will be much more modest than the initial impact, but they may also prove to be politically more difficult.

New York congestion charge rate schedule page 1

New York congestion charge rate schedule Page 2

Hawaii launches the fourth light RUC programme in the United States, with much more to come

Phase 1

1 July saw the launch of the fourth US state (following Oregon, Utah and Virginia) to implement an operational RUC system for light vehicles (as distinguished from the five states with weight-mileage taxes for heavy vehicles).  Known as HiRUC, it follows two pilots and extensive consultation, and reflects the relatively high take-up of EVs in the state of Hawaii (3.5% of light vehicles are battery electric vehicles (BEVs) or plug-in hybrids (PHEVs).

HiRUC affects around 38,000 vehicles, being EVs with a gross vehicle weight of 10,000 pounds or less (around 4.5 tonnes).

Phase 1 of HiRUC provides a choice for owners of battery electric vehicles (BEVs) to either pay an annual fixed fee of US$50 or to pay per mile at a rate of US$0.008 (up to a cap of US$50). In effect, the RUC option means those who are likely to drive fewer than 6250 miles per annum can pay less.

The system will be implemented by odometers being checked at annual vehicle safety inspections and reported to the Department of Transportation. BEV owners will receive an invoice for RUC at the time of their annual registration renewal. The RUC invoice will be based on the vehicle safety inspection reading of the odometer. This will be the first US RUC system based on odometer readings at safety inspections.  Vehicle at the time of re-registration will choose whether to pay the US$50 or go onto RUC.

Payment for RUC is collected at the same time as the registration renewal.  

New BEVs will be placed on the flat fee at first registration, and owners can choose to remain on it, or switch to RUC after their first safety inspection.

It's important to note that this is meant to resemble the State Gas Tax, not the US Federal Gas Tax. Noting there is also County Gas Tax (and separate work underway to consider how counties could have their own RUC collected through the same means). 

Vehicle owners that select a flat fee can change onto RUC at their next renewal (those on RUC have no need to, as their payments are capped at US$50).

Pilots

Before implementation, the Hawaii Department of Transportation undertook studies and two key pilots. The first was in 2019-2020 when 359,659 residents received Driving Reports comparing what they paid in fuel tax (based on miles driven and the average vehicle efficiency of their vehicle) to what they would have paid had there been RUC at the same level.  This was an important start to engaging with the public on RUC as a replacement to the gas tax. 

This was followed up by a pilot with 2,129 participants including a range of mileage reporting options. That included smartphone odometer imaging and plug-in devices (into OBD2 ports) with and without GPS location identification. Odometer image capture was most popular.

An archive of the previous work is available here, along with a factsheet about the new system and the relevant legislation.

Phase 2

From 1 July 2028, the fixed fee will be scrapped and all light BEVs will be required to be on HiRUC. Work on designing that transition is underway, as this will be the first mandated light RUC system in the United States (all others still have the choice of an annual flat fee or RUC).  The obvious question will be whether the US$50 cap will remain in place, noting there is no such gap for the State Gas Tax.

Beyond 2028

Act 222 (the legislation introducing HiRUC) requires that HDOT to develop a Long-Term Transition Plan to transition all light-duty vehicles to RUC by 2033.  So placing all BEVs on RUC is very much a step towards a much bigger shift. This will consider when and how to include PHEVs and other hybrid vehicles, but also all gasoline powered vehicles and the future of the State Gas Tax. Noting this is only for light vehicles, so medium and heavy vehicles will have to wait.  The State Gas Tax can't be scrapped when those vehicles are paying it.

Still, no other US state has indicated a proposed deadline for transitioning ALL light vehicles to RUC.  Only Iceland and New Zealand have such policies (albeit in both cases ALL vehicles), and almost certainly Iceland will be the first to achieve it.  

Hawaii has a range of advantages. Its islands are small, there is not only no international nor inter-state traffic, there is very little inter-county traffic as there are no roll-on/roll-off ferries to enable people to take cars conveniently between the islands.  Nevertheless, while there are stereotypes about Hawaii operating more slowly than the continental United States, that is all they are.  Hawaii has shown that with some clarity of objectives, solid engagement with the public and stakeholders, and clear policy analysis around options, RUC can be implemented relatively swiftly and efficiently.

US Federal Highways Administration terminates agreement authorising New York congestion charge

On 20 February 2025 the Executive Director of the US Federal Highways Administration wrote to the Commissioners of the New York State and City Departments of Transportation and the President of the MTA as follows, essentially requesting that the New York congestion charging scheme cease to operate from 21 March 2025 on "Federal aid highways":

Dear Commissioner Dominguez, Commissioner Rodriguez, and President Sheridan:

I am writing pursuant to Secretary Duffy’s February 19, 2025, letter terminating the November 21, 2024 Value Pricing Pilot Program (VPPP) Agreement under which the Federal Highway Administration (FHWA) has approved the implementation of tolls as part of the New York’s Central Business District Tolling Program (CBDTP). The Secretary’s letter stated that the FHWA will contact the New York State Department of Transportation (NYSDOT) and its project sponsors, Triborough Bridge and Tunnel Authority (TBTA) and New York City Department of Transportation (NYCDOT), to discuss the orderly cessation of toll operations under the CBDTP.

In order to provide NYSDOT and its project sponsors time to terminate operations of this pilot project in an orderly manner, this rescission of approval and termination of the November 21, 2024 Agreement will be effective on March 21, 2025. Accordingly, NYSDOT and its project sponsors must cease the collection of tolls on Federal-aid highways in the CBDTP area by March 21, 2025. Please work with Rick Marquis, the FHWA’s New York Division Administrator, to provide the necessary details and updates regarding the cessation of toll operations.

A Federal aid highway covers all Interstates and the Primary road system (FAP) and Secondary road system (FAS), so does not cover all roads within the zone, but it does include some. 

This follows a letter to the Governor of New York from the Secretary of Transportation expressing concern about the scheme's burden upon people in New York and New Jersey:  

I share the President’s concerns about the impacts to working class Americans who now have an additional financial burden to account for in their daily lives.  Users of the highway network within the CBD tolling area have already financed the construction and improvement of these highways through the payment of gas taxes and other taxes.  The recent imposition of this CBDTP pilot project upon residents, businesses, and commuters left highway users without any free highway alternative on which to travel within the relevant area.  Moreover, the revenues generated under this pilot program are directed toward the transit system as opposed to the highways.  I do not believe that this is a fair deal.

The use of revenues is clearly a key issue, but the misconstruing of the need for a fee to enable people without a free alternative is unfortunate. 

I have concluded that the scope of this pilot project as approved exceeds the authority authorized by Congress under VPPP.

This is hotly debated.   The Secretary's claims are that the legislation enabling the scheme did not envisage cordon pricing, compared to conventional tolls.  The other key claim is that as the scheme is primarily designed to raise revenue, not reduce congestion, then it is outside the scope of the Value Pricing Pilot Program.  

By contrast, the Governor of New York, Kathy Hochul is pushing back. Here is her speech to the MTA Board. and her statement on receipt of the letter from the Secretary of Transportation.

Her main claim is that it is not for the Federal Government to stop New York from introducing pricing on its roads. She is litigating against the claim of the Secretary of Transportation. 

So the battle for New York congestion charging goes to the courts...

Iceland confirms it will be the first country to fully replace fuel tax with distance based road user charges

Early last year I wrote about how Iceland was the first country ever to mandate a distance-based road user charge for electric vehicles and plug-in hybrid vehicles, which it successfully implemented just over a year ago.  Iceland also passed legislation to enable RUC to apply to all light vehicles.

The current Icelandic RUC system is depicted here on the official website, displaying the rates for EV/Hydrogen vehicles and PHEVs, 

The rates are ISK6 (US$0.043) for EVs/Hydrogen and ISK2 (US$0.014) per kilometre for PHEVs.

Iceland's public broadcaster, RUV, has reported (Icelandic) that the system is now to be extended to other vehicles according to the Minister of Finance, and it will apply from the middle of 2025.  

Coinciding with this, fuel tax will be abolished. There are no key details from the report except that the Minister of Finance, Prime Minister and Transport Minister are working on arrangements to implement it, and it will be similar to what has already been introduced. 

Iceland's `"Roads to the Future" site is quite good on data and more information about the concept, but major questions remain unanswered. The site indicates that weight will matter, which of course is important once vehicles have a gross maximum allowable weight of over 3.5 tonnes, noting Iceland already has a distance tax for vehicles over 10 tonnes.  

No doubt this will be revolutionary, and by abolishing the fuel tax (although there may remain a carbon tax to reflect CO2 emissions, it will be the first country to abolish motoring tax on fuel altogether (the only other example even close to this is New Zealand having no such tax on diesel, in exchange for having road user charges on all diesel powered vehicles).

Some of the big questions are as follows:

• Will the rate for all other light vehicles be the same as the EV/Hydrogen vehicle rate? (seems logical)
• Will the rate for PHEVs rise to the same level as other light vehicles?
• What will the rate structure be for vehicles from 3.5 tonnes to 10 tonnes?
• What will happen to the heavy vehicle distance tax? Will it be raised to reflect abolition of the tax on fuel, or will it be replaced with the new RUC system as well?
• What efforts will be taken to minimise fraud with a system based on reporting odometer use?
• What have been the results of the introduction of RUC on EVs, PHEVs and Hydrogen powered vehicles so far? Any issues with non-compliance or fraud?
• Will the system be entirely based on manual reporting of distance (using mobile phones) or is Iceland open to more technologically sophisticated options to automatically report distance (particularly for heavy vehicles).
• Will it apply to motorcycles as well, and if so will it be using the same system?
• Will there be exemptions for travel off of public roads?
• Is revenue going to be hypothecated to spending on roads (as fuel tax was not)?
• Will future rate setting be informed by a cost allocation study/model, or by another approach that links prices to costs or another economic basis for price setting?

Principles of road user charging design in Iceland

Iceland is a small country with only 373,000 people and 12,898km of roads, but high ownership of private cars. 50% of newly registered cars are EVs or PHEVs, with over 18% of the light vehicle fleet now consisting of such vehicles.

It's notable that the Icelandic Government has calculated that with the new system it still will cost more to own and operate a petrol powered car than an EV.  Notable because it is a key concern that introducing RUC will disincentivise purchases of RUC.

 The taxes listed in Icelandic below are from left to right on the legend:

- Kilometre Tax

- Fuel tax

- Carbon Tax

- Energy cost

- Annual vehicle fee

- VAT

There is a presentation due to be made at the March 2025 Brussels RUC Conference, arranged by Akabo Media, on Iceland's system. It will be interesting indeed to see if there is anything to add.

Denmark successfully introduces RUC for heavy trucks, Netherlands will be next

To little fanfare, on the 1st of January it was mandatory for trucks operating on national highways and some municipal roads, in Denmark, with a gross maximum weight of 12 tonnes and above, to pay a road user charge (called a truck toll in the EU) based on distance.

The main website for the charge is here.

It applies to all trucks, whether registered in Denmark or not, and by applying to all national highways and some municipal roads, it means around 10,900km of road is subject to the charge.

Denmark heavy truck RUC road network until 2028

However, this is only the first stage in a programme to introduce RUC to all vehicles over 3.5 tonnes, on all public roads in Denmark. 

The stages are as follows:

• 1 January 2025: Trucks with GVW of 12 tonnes and above travelling on all national highways and some municipal roads.
• 1 January 2027: All trucks (GVW of 3.5 tonnes and above) travelling on all national highways and some municipal roads.
• 1 January 2027: All trucks (GVW of 3.5 tonnes and above) on ALL public roads (around 75,000km).

The system parallels withdrawal of Denmark from the Eurovignette programme, which charges trucks on a day, week, month or annual basis to operate in specific countries (now just Sweden, the Netherlands and Luxembourg).  Of course the Eurovignette only applies to trucks 12 tonnes and above. The charge will be new to vehicles below that.

Rate structure

There are three weight categories for 12 tonne and above:

• 12-18 tonnes
• 18-32 tonnes
• 32-44 tonnes

Fees vary by CO2 emission class, with surcharges for operating in low emission zones. This is primarily a charge based on changing behaviour for environmental purposes, and is less about infrastructure costs.  

Four of the five CO2 emission classes have charges that vary by registered maximum allowable weight of the truck combination. The zero emission class has the same charge regardless of size - being DKK0.13 per kilometre (US$0.018 per km). This is indicative of how much importance is being given to encouraging zero emission trucks.

The highest fee is for trucks over 32 tonnes at the highest emissions category, at DKK1.1 per kilometre US$0.16 per km). 

How is distance measured and reported, and how is it paid?

Denmark has been technology neutral and has enabled an open market in EETS service providers for its system. Three companies to date are registered to offer RUC collection services:

• BroBizz (a subsidiary of Sund & Bælt Holding A/S, the Danish SOE responsible for setting up the entire system)
• Telepass (a long standing Italian EETS provider) and
• ØresundPAY (the service provider for the toll crossing to Sweden)

All three provide their own GNSS enabled OBUs (on board units) to be installed either professionally or by the vehicle owner, in their vehicles.  One provider includes the ability to use an app to measure and report distance.  The market is open, there could be more providers (and likely will be) in the years ahead.

Occasional users can buy a "toll ticket" which is literally a permit to travel a set distance within Denmark on specific roads, and is designed for trucks making rare trips into the country.  Toll tickets are only available digitally.

The system is enforced with a network of Automatic Number Plate Recognition (ANPR) cameras fixed by the roadside, and also a fleet of enforcement vans which check whether the number plate of a truck is registered either with a service provider or a toll ticket has been paid for it.

Non payment is subject to a fine of DKK4500 (US$634).

What's significant about Denmark?

Besides being another country in Europe with heavy vehicle RUC, Denmark is showing how a RUC system can be introduced entirely serviced through an open market of service providers, with a technology-neutral approach. GNSS OBUs, OEM telematics or mobile phone apps might all be used. Denmark is also introducing heavy RUC on all roads, which is rare in Europe. Only Switzerland and Iceland have RUC systems that apply to distance travelled on all roads (although the Belgian heavy RUC system does measure distance on all roads, it applies a zero tariff to many of them).

The only significant negative news is that some truck operators believe that some operators have been incorrectly fined.

What about light vehicles?

Denmark has already been running a light vehicle road pricing trial based on distance. time and location.  It was focused not just on pricing EVs, but on managing congestion.  Two concepts are being tested - distance-based pricing and time-based (time being the duration of time driving). Both with location and time-of-day elements to it. 2,200 participants in the pilot.

It started in July 2023 and ends in July 2025. So there will be considerable interest in the outcomes of that trial. It will be evaluated subsequently and the results will no doubt inform policy discussions on road user charging in Denmark. It will be helpful that the heavy vehicle system is operational and will have been proven to work effectively. 

Who's next? 

The Netherlands will have a heavy vehicle RUC system from July 2026, it will also replace the Eurovignette as well as part of the motor vehicle tax for such vehicles ( a fee chargeable every three months similar to registration).  It will be for all trucks 3.5 tonnes and above and only on major highways and some major local roads. 

The Dutch system will require OBUs to measure and report distance, and will use DSRC as the enforcement technology (communicating with roadside and mobile enforcement units to check if vehicles have operating OBUs). 

A consortium called "Triangle" led by Via Verde of Portugal (including Ascendi and Yunex) has been contracted to introduce the system, supplying OBUs and the remainder of the system, although it will be open to competing service providers.  Via Verde will be the "base" supplier of account management services to those not using EETS providers

Vitronic has been separately contracted to provide the enforcement infrastructure (roadside and mobile).  The core back office system is being owned and operated by RDW (the Netherlands Vehicle Authority, which is responsible for the RUC system).

Australia and road user charging

It's pleasing to see Australian Federal Treasurer, Hon. Dr Jim Chalmers, be upfront about the need for Australia to introduce a road user charge (RUC) for electric vehicles as a "priority" tax reform, at a recent business dinner according to the Australian Financial Review.

None of this is new, as Australia has been down quite a tortuous stumbling path on reforming how motor vehicles are charged to use the country's roads for over a decade, depending on how you look at it.

This is distinct from tolling, which is used in three States for specific projects. It is NOT about that, but rather how roads are charged for across the entire network

Very brief history

Australia has been on a long, slow path to investigating and piloting RUC for heavy vehicles (defined in Australia as any vehicles with a GVM of 4.5 tonnes and above) for over a decade. The main reason being that the current system, of fuel tax (with a proportion deducted so that the remainder is a fuel based "road user charge" based purportedly on a cost allocation calculation), collected Federally with steeply escalating motor vehicle registration charges based on weight and configuration to attempt to make up the shortfall that fuel tax can't recover (and collected at State and Territory level), is less than optimal.  

The latest step in this policy process has been the National Heavy Vehicle Charging Pilot, which had its genesis multiple Ministers (and Prime Ministers) ago, under the Turnbull Government with Minister Paul Fletcher. That pilot has concluded and the results of the evaluation of the pilot have yet to be published, but there is little political focus on this, mainly because the issue it is trying to address is not a loss of revenue, but rather a poor link between what is paid to use the roads and the supply of roads.

That is addressed through a programme called Heavy Vehicle Road Reform, which has been moving glacially for some years.  Heavy Vehicle Road Reform contains all of the elements for a fundamental reform of how roads are charged for, funded and managed in Australia, but does require consensus between Federal and State/Territory Governments. It could be combined with agreement to progress road user charging for EVs, but they have generally been on a different track.

At least four Australian states advanced RUC for EVs to some level. South Australia, New South Wales and Western Australia all passed legislation to introduce it in a future year, but the South Australia legislation was repealed by a change in Government at the previous election. The New South Wales and Western Australia legislation remain intact for EVs to pay by distance from 2027.  Victoria introduced such a charge in 2021 only to have it overturned by a court decision ruling it unconstitutional in 2023, which raises big questions about whether the other states could implement such a charge themselves. 

That's the nexus of the current policy question is about what the Federal Government does to enable the implementation of RUC for EVs. It has choices ranging from implementing a Federal RUC to simply empowering the States and Territories to implement their own systems within a regulatory framework designed by the Federal Government.

The latter makes sense, but also presents a range of options around having a integrated set of incentives around implementing RUC, so that the Federal Government isn't simply handing over a revenue source (fuel tax for petrol and diesel vehicles at present, EV RUC for the future) to States and Territories unencumbered. 

I've already written about some of the issues that need to be thought about, and I think it requires a reset of the relationship between the Federal and State/Territory Governments on road funding, which can include heavy vehicles. That would mean the States and Territories accepting that they will not be responsible for collecting and spending all revenue from a future RUC, but also the Federal Government accepting some form of hypothecation for that revenue (which doesn't currently apply to fuel excise).

Every year RUC for EVs is delayed, it gets a little harder to implement because the constituency for it grows.  A Federal election is due in Australia no later than 17 May 2025. Hopefully, whichever party (or parties) forms the next Government will move quickly to establish a policy platform for RUC that should incentivise acceptance by States and Territories and enable progress for both light and heavy vehicles in the coming years.

Bearing in mind that in the US, there is considerable progress by many States and now the Federal Government in considering how to fairly charge for EVs and the transition away from fuel tax.  Meanwhile, New Zealand has had a RUC for over 40 years, recently extended to EVs and PHEVs (it has applied to light diesel vehicles for decades) covering over 1m vehicles all up, it should be possible for Australia to introduce, at least in the first instance, a basic national RUC charge equivalent to fuel duty (or better yet, based on a cost allocation approach), collected at State/Territory level.  

New York's congestion charge is live, but it started on a Sunday

Yes New York is different from the rest of the United States, and Lower Manhattan is different from the rest of New York.  Every statistic around housing density, car use, mode share and supply of public transport demonstrates that.  However, today New York is the first US city to implement any form of urban road pricing/congestion charging that applies to existing roads which varies by time of day.

An initial report is of no drama at all, it being a Sunday as the scheme launch date. The New York Times has been live blogging about it, and the only point of note is apparently slightly less traffic. Winnie Hu from New York Times reported:

Traffic already appeared to be lighter on Sunday morning in the congestion zone. The average travel speed was 15.1 miles per hour at 8 a.m., or about 3 percent faster than the 14.6 miles per hour recorded at the same time on the first Sunday in January 2024, according to real-time data from INRIX, a transportation analytics firm.

That's with a US$9 a day charge from 0900-2100 in weekends. It is the same charge weekdays from 0500-2100, with a US$2.25 charge at all other times (this is for cars). The price schedule is not that complex, with variations based on vehicle size (road space occupancy), type of account and timing. The full schedule is here.

The "New York Central Business District Tolling Program" as it is officially called, is primarily about raising a lot of money for public transport, especially for the subway.  So it is a revenue scheme first and foremost, but which also has some clear objectives around improving both road network performance and environmental outcomes. 

With the lower rates approved by the Governor just over a month ago, it is expected to raise US$500m per annum in the first three years, with an increase after that to take it to around US$700m. If it were not for that level of revenue, it would not have the political support it needed.

From a transport (and environmental) policy point of view it has other useful objectives, it should reduce traffic, improve speeds and reduce emissions.

The big test will be tomorrow of course.

New York congestion charging is back : 5 January 2025

In May 2024 I wrote on how the Governor of New York, Kathy Hochul had suspended what was then called the Central Business District Tolling Program.  It would have been the first proper congestion charge in the USA, in the sense that it applied a charge to driving on existing roads to manage demand, and generate revenue.

Hochul suspended it for multiple reasons, but a key one was to defer the risk of its introduction costing the Democratic Party support in the November Federal Election for the House of Representatives.

With that all over, and with the perceived risk that the forthcoming Trump Administration may cancel the program, it is all "go".

The New York scheme is now called the Congestion Relief Zone and it will be in operation on 5 January.

All of the equipment is in place, it is ready to go, and with the passage of the Federal election, the Congestion Relief Zone in New York will go live on 5 January.  It was suspended in June, purportedly for policy reasons, but primarily a mix of concern over lawsuits and the effect the charge would have had on the elections to the House of Representatives.

The main change to the suspended scheme is a reduction in the peak time price from US$15 to US$9.

It's not clear whether the daytime period remains as previously proposed (0500-2100 weekdays and 0900-2100 weekends), but it is clear that the daytime charges will range from  US$4.50 for motorcycles, US$9 for cars and up to US$21.60 for large trucks and sightseeing buses.  Commuter buses will be exempt.

A per-trip surcharge of US$0.75 applies to taxis and black cars, and US$1.50 for app-placed trips (e.g. Uber). 

The off-peak discount is apparently 75%, explicitly to encourage off-peak truck deliveries. Albeit, the case for having any charges between 2200 and 0500 appears to be low.

The price will not increase until 2028 when it can be raised to US$12 for cars (with proportion increases for other vehicle classes) through to 2030.  

The charge is expected to enable borrowing of around US$15b in bonds to support the capital program of the New York MTA including:

· Second Avenue Subway Phase 2 extension to East Harlem

· Replacing signaling on 6 lines

· Improving accessibility at 20 stations

· New electric buses

A range of other projects are listed, including renovating parks and greenspaces.

The scheme is forecast to reduce VMT in Manhattan by 5% and a 10% reduction in the number of vehicles entering lower Manhattan. The charge is also being accompanied by other measures to reduce congestion including:

· Expanding enforcement of intersection blocking also known as “blocking the box” violations

· Expanding use of weigh-in-motion technology to enforce weight limits of trucks

· Raising threshold value for removing abandoned vehicles

· Permitting the City to impose surcharges on permits for construction that remove traffic lanes.

What next?

New York has around six weeks before the Congestion Relief Zone comes into effect, but there is a lot to do. A campaign to inform motorists of the coming zone will be critical, and it will be essential for as many as possible to be informed of what they need to do to be compliant with it. As a majority of vehicles entering lower Manhattan already have toll tag accounts for the multiple New York and New Jersey toll roads and crossings (Lincoln and Holland Tunnels carry the traffic from New Jersey and both are tolled), this should be easy for them. The real cost will come from the tens of thousands of occasional visitors, particular from the remainder of Manhattan which don’t have toll tag accounts. 

Eyes will be on the impacts of the charge, the capacity of the bus, subway and rail networks to handle increases in demand, and the profile of demand on the road network, but I suspect the greatest impact will be in reducing frequency of trips. Irregular travel will reduce. There will be modest modal shift, but the real impact will be shifting of some commercial demand to the off-peak period and reduction in trip frequencies.

The press release from the Governor claims motorists will "save" US$1500 per annum, but this is comparing the price schedule now to the one previously proposed. It is being sold as being an improvement by being lower price, but it is still a new charge for driving into lower Manhattan.  This press release covers the positive comments from multiple state and city politicians supportive of the plan.

A lot of the details have not been announced, but I expect most of what was previously announced will continue.  These details will need to be confirmed in the coming weeks, but all going well, the New Year will see New York as the next city globally to introduce congestion charging, and the first in the USA.

Yes its primary focus is in raising money, it would not be happening if the pressure to raise revenue to fund public transport renewals and improvements were not so high, and it is a blunt scheme that will not do much to change time of travel.

As I wrote before, it almost certainly is not a model for the rest of the US to follow, but the principle should hopefully be a success. It should reduce congestion, it should raise a lot of money and enable the city to operate more efficiently.  Let's hope it proves to be a great success.

New Zealand aims to shift all vehicles onto road user charges

Yesterday, 29 August 2024, the New Zealand Minister of Transport, the Hon. Simeon Brown, outlined the Government's ambitions on revenue policy (distinct from policy on time-of-use/congestion pricing).

RUC for all vehicles

The "Revenue Action Plan" has several elements, but by far the most ambitious step is to transition away from fuel tax toward distance-based road user charges (RUC) by "as early as" 2027. The objectives of this is fairness as seen in this statement:

Transitioning to RUC will ensure that all road users are contributing fairly to the upkeep of our roads, regardless of the vehicle they drive.

Note that NZ has had a RUC system since 1978 which applies to all heavy vehicles (vehicles over 3.5 tonnes) regardless of fuel (although electric heavy vehicles have an exemption which expires in 2025), and all vehicles powered by a fuel not subject to excise tax. That means all light diesel vehicles, and since earlier this year includes EVs and plug-in hybrids.

The transition to all vehicles being on RUC means battery-electric hybrids and petrol (gasoline) powered light vehicles (and the handful on natural gas).  

RUC in New Zealand currently has the following numbers of vehicles:

• 176,000 heavy vehicles
• 885,000 light diesel vehicles
• 103,000 light EVs and PHEVs

Note there is no excise tax on diesel in NZ.

NZ has the world's largest light RUC system today, and will be extending it to another 3.7 million vehicles. For most vehicles paying RUC, their owners buy prepaid licences in blocks of 1,000s of km based on vehicle class, with paper licences posted following online purchases (there are also options to buy "over-the-counter"). Some commercial vehicle owners paying for telematics services from three certified service providers are charged RUC through those service providers, which supply on-board units using GNSS and mobile data technology to measure and report travel, and calculate RUC to be prepaid almost "just in time".  Around half of heavy vehicle RUC revenue is generated through these providers.

Other heavy vehicles are required to have hubodometers installed (including all trailers) and have paper licences issued, and light vehicle owners have odometers as the distance reference.

It is fairly clear that there will some challenges in the coming months and years in scaling up and reforming NZ's RUC system to accommodate a significant growth in vehicle numbers.

Of course Iceland also announced it was shifting all vehicles onto RUC by 2025, although it is unclear where that programme is at yet. However, if NZ does this, it will be the largest country to have shifted all vehicles onto RUC and, as it appears, to have abolished fuel excise duty.

Toll

Other parts of the revenue plan include expanding the scope for tolling, with the presumption that all new major roads would be tolled.  The announcement included that three roads currently under construction or approved would be considered for tolling namely:

• Takitimu North Link
• Manawatu Gorge replacement (Te Ahu a Turanga) and
• Otaki to north of Levin highway

All three of these routes are dual-carriageway/expressway standard roads so will be practical to toll, albeit modelling will need to determine the revenue vs. costs. All will have alternative inferior routes available, so motorists will be expected to pay a premium for the significantly improved routes. It will be interesting to see what proportion of capital costs of these projects will be recoverable from tolls.

Other measures

The announcement also noted that value capture would be unlocked as a tool to raise revenue from the likes of property owners directly obtaining uplifts in property values from spending on large transport projects.  "Better use of existing funding tools" would also be part of the plan.

Big step forward

With the recent announcement enabling time-of-use road pricing (congestion pricing) and this announcement, this places NZ at the forefront, globally, in advancing road pricing. As some jurisdictions (Iceland, Netherlands and US states) are advancing RUC for part of their fleet, NZ is about to embark on a major step towards covering all of its fleet. While progress on urban road pricing on existing roads remains slow elsewhere, NZ may be ahead of most cities if one or two cities introduce pricing in the next few years. NZ will certainly be far ahead of any other car-oriented low density countries in advancing road pricing in some form.