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:
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.
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