Australia pursues road user charging... again...

There has been a lot of coverage in Australian media of the idea of a national road user charge (RUC) being applied to electric vehicles (EVs), mainly in the context of the Australian Government’s recent “Productivity Summit” (officially called Economic Reform Roundtable) which sought to bring together government, business, unions and other non-government organisations to generate ideas to reform Australia’s economy.

The themes of that event were:

• Making our economy more productive.
• Building resilience in the face of global uncertainty.
• Strengthening the budget and making it more sustainable.

So it isn't just about productivity, but also economic resilience and strengthening the government's budget. This is where RUC comes in, it is all about budget sustainability.

In 2022, there were already forecasts of where declining fuel excise revenue would lead in Australia. By 2032, the loss would be around A$3.5b per annum in 2022 values.

Forecasts of Australian fuel excise revenue

Australia started with heavy vehicles

Australia has been interested in RUC for literally decades. From the early 21st century there was recognition of the limitations of the status quo, particularly for charging heavy vehicles. The key issues being the mismatch between what heavy vehicles are charged to use the roads (through fuel excise and weight based registration fees) and the supply of road capacity that matters to them. From the COAG (Council of Australian Governments) Road Reform Agenda and the subsequent Road Reform Project, it was established early on that productivity gains from RUC in Australia would only be fully realised alongside supply side reforms. In other words, the revenue generated needs to be spent on improving infrastructure for heavy vehicles, with transparency around ensuring universal service.  From 2011 the Heavy Vehicle Charging and Investment (HVCI) project was run through till 2014, and although a lot of work was produced, it didn't deliver any reform.  It cost around A$25m  involved a Secretariat set up in Melbourne and over 75 reports were produced, but very little happened. It was a policy wonk's dream, but didn't bring the industry on board. 

This was followed by the Heavy Vehicle Road Reform (HVRR) programme, which itself has lost momentum after several years.  In 2015 the HVRR roadmap was agreed, which you can see below:

Australia's Heavy Vehicle Road Reform roadmap

It was an ambitious reform agenda, it would have seen heavy vehicles subject to direct user charges, the revenue of which would go into a hypothecated fund and investment from that fund co-ordinated based on the priorities of users and broader community service obligations (in particular, ensuring a basic level of service across the rural public road network). An independent economic regulator would set the RUC for heavy vehicles based on what is needed to pay to secure agreed service standards and capital investment, and road managers would be required to deliver those service standards.

In short, it wasn't about just RUC, but about roads operating more like a regulated utility for heavy vehicles.  Progress on this has been slow with reporting indicating that only Phase One has been delivered (greater transparency on expenditure investment and delivery).  Changes in Government, particularly Ministers, but also the change in Government in 2022 have seen this programme get a low priority. This is unfortunate, given the Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA) website indicates that the economic benefits of reform are "estimated to be between $6.5bn and $13.3 billion in net present value over 20 years (7% discount rate)".

It seems rather an omission for an economic reform roundtable to not ever utter a word about this.

Most recent progress saw the implementation of the National Heavy Vehicle Charging Pilot from 2019-2024, with one small scale trial and a three phase large scale trial. This was the largest pilot of RUC in Australia. It was primarily an engagement exercise with industry, but also tested multiple technical solutions as well as gathering data on portions of the heavy freight and bus sector to inform policy advice.

The potential to get better investment in the road network, including better results for truck operators in particular, by eliminating network bottlenecks (in particular weight-restricted bridges) and enabling wider network access perhaps should have got more attention.  Given the agenda on road reform has been bipartisan by-and-large (with the COAG work being undertaken under both Coalition and Labor Governments, and likewise the HVRR work started under the Coalition continued under Labor.  Note also that progress on this is dependent on support from States and Territories, but is highly dependent on Federal leadership.

However, HVRR and heavy vehicle RUC doesn't promise much progress on new revenue, so it got less state interest than RUC on vehicles that are not subject to fees to use the roads - EVs.

RUC for EVs

Although talk of RUC for EVs is being said to be in the context of productivity, if politicians and officials were honest, it isn’t really about that. At a stretch, there is an argument that EVs get “overuse” due to them not being subject to any fee or tax to use the roads. This means EV use, particularly in cities where there is a greater chance of alternative modes of travel, is excessive, and more efficient (and productive) use of road space may come if EVs are subject to a RUC that reflects a fair allocation of the costs of maintaining and developing the road network.

However, it is important to be clear that RUC for EVs is about government revenue, it does not have momentum for any other reason.  It is about "strengthening the budget and making it more sustainable".

It's pretty obvious what this is all about, although it is also clear that the impact of EVs on fuel duty revenue is fairly minimal so far. There is much greater impact from more fuel efficient petrol vehicles, and in particular battery electric hybrids.  Putting RUC on EVs (and plug-in hybrids) is a first step.

In parallel with Heavy Vehicle Road Reform, then Infrastructure Minister Paul Fletcher did try to get a study up and running on investigating options for RUC for light vehicles, focused on this issue. However, the Morrison Government abandoned this early, which was clearly a mistake.

Of course Victoria tried to do it at state level, but had its "RUC" overturned by a court case that ended at the High Court of Australia ruling it as unconstitutional.  I wrote about that already.  Meanwhile, New South Wales has passed its own legislation which will see a RUC commence in July 2027 for EVs, Western Australia also has similar legislation.  So the pressure is on the Commonwealth Government to develop a national framework for what looks like a patchwork of State and Territory based RUC.  That raises a whole host of issues.

I wrote about some here. Technology isn't one of them, neither really are the issues around how to implement it.  The biggest issues are around governance including:

• Whether there should be a Federal RUC that is one rate, and separate State and Territory RUCs?
• What rules, if any, will apply to the use of revenue collected by either RUC?
• Who sets the rates at Federal and State/Territory levels? Will rate setting be subject to any independent oversight (e.g. the National Transport Commission or the ACCC)?
• What happens if/when RUC expands beyond EVs to include plug-in hybrids (which pay fuel excise) and battery electric hybrids? Shouldn't policy on this include all new powertrains, and consider what to do about very fuel efficient petrol powered vehicles?
• How should heavy EVs be treated?
• How should travel across State/Territory borders be addressed for State/Territory RUC?

What's next?

One of the outcomes of the Economic Reform Roundtable appeared some agreement to progress RUC for EVs. In an interview on the ABC TV current affairs show Insiders, Treasurer Jim Chalmers answered a question on the topic from Insiders host David Speers:

Speers:

I just wanted to ask you quickly on the road user charge that’s coming. You’ve got to work out the details with the states and territories. Is there a chance that motorists might have to pay both fuel excise and road user charge, or can you rule that out?

Chalmers:

No, our focus in road user charging is on electric vehicles. We’re not trying to work out ways to double‑tax internal combustion engines. We’re trying to make sure that people who drive EVs, increasing numbers of people who drive electric vehicles, are making a contribution to the upkeep of the roads that they use. It’s fundamentally about making the system a bit fairer.

We’ll take the time to get it right. The states are putting together an options paper for us to consider at our meeting, before long actually, the 5th of September, and so we’ll go through that.

The main point of contention at the reform roundtable was actually whether a road user charging regime focused on electric vehicles begins with heavy electric vehicles like electric trucks, and there’s some kind of sequence after that, or whether we be more ambitious earlier.

So, we’ll work through all of that. I don’t want to predetermine the discussions I have with the states or the considerations of our Cabinet, working with Catherine King and Chris Bowen and the Prime Minister and others. But we have made it clear, we do think a change is warranted here, and we’ll take the time to get it right.

Now it's important to remember that fuel excise duty in Australia is not hypothecated towards road spending, so the claim this is about a contribution to the upkeep of the roads is strictly not true (this is unlike fuel duty and RUC in the United States and New Zealand).  He claims whether starting with heavy electric vehicles would be useful first step. I would hate to be a naysayer on this, but it frankly seems like a wasted effort.  There are so few heavy electric vehicles that it would generate little revenue, and would teach state governments little about setting up systems for private individuals driving light EVs (and unless there is a programme for wider heavy RUC, it's not clear what the point of starting with heavy EVs is).

For what it is worth, there is merit in enabling both a national and a state/territory RUC rate, and to take some of the principles of HVRR in having independent price regulation, an investment programme based on what users need and a hypothecated fund that at least collects enough money to cover the costs of maintenance and renewal attributable to light vehicles. 

Allowing States and Territories to set regulated RUC rates to cover a portion of their costs in maintaining their road networks would be a start, on condition they also collect a national RUC.  A key issue will be how to address cross border travel with State/Territory RUC if location enabled distance measurement isn't mandated (and it is likely not to be, at least for light vehicles), but there are ways to do this seeing the experience in the US.

In the absence of any Commonwealth action, there is likely to be a NSW RUC from 2027 given the legislation that has been passed, and the eagerness for NSW to differentiate itself from the Vanderstock court case that brought down Victoria's Zero Emission Vehicle Fee. 

There is a lot to do, but the direction of travel on RUC policy is positive, let's just hope that momentum isn't lost for this, as it appears to have been for heavy vehicle RUC. 

It is understandable that Australia can't easily follow Iceland and New Zealand given scale, and New Zealand's long history in having RUC for diesel vehicles, but it can follow the United States which is pushing on with RUC at the state level as well as investigating it federally.  

Meanwhile it ought to completely ignore the distractions of some academics who want this to be the introduction of full network road pricing.  That would be the death knell to RUC as it has been in the UK, Netherlands and Finland.

(Disclosure: My employer Milestone Pacific acquired in 2021 by CDM Smith, advised the Department of Infrastructure, Transport, Regional Development, Communications and the Arts on the National Heavy Vehicle Charging Pilot. I was the PM for that advice).

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.

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.  

Iceland and New Zealand: The first two countries to mandate road user charging for EVs

After many many years of others talking about it, one country has done it and another will soon follow.  On 1 January 2024, Iceland introduced mandated road user charging (RUC) for electric vehicles (EVs), Plug-In Hybrids (PHEVs) and Hydrogen powered vehicles, and from 1 April New Zealand will also do so for EVs and PHEVs.

Iceland

Iceland has launched EV RUC with a website called "Our Roads to the Future".  No later than 20 January 2024, eligible vehicles are required to have had their odometers read and recorded and transmitted to a government website or via a specific app. Those unable to use websites can go to an authorised service centre for an official reading.

The website indicates that the average petrol powered car pays ISK178,000 a year to use the roads (~US$1305) so the rate for EVs and hydrogen powered vehicles will be ISK6/km (US$0.044/km or US$0.07/mile), and for PHEVs at ISK2/km (US$0.015/km or US$0.024/mile). The lower fee for PHEVs reflect that they are still paying fuel excise for the use of petrol. Iceland presumably calculating that around two-thirds of kms driven by PHEVs is powered by petrol.

Iceland has indicated that this is a first step towards phasing out fuel taxes as a means of charging for road use, with the intention that RUC apply to all vehicles from 2025 (a distance-based tax already applies to some heavy vehicles). 

The reason given is the growing proportion of EVs and PHEVs in the vehicle fleet as illustrated by the graph below:

Proportion of private car fleet in Iceland with EVs or PHEVs

Furthermore, Iceland reports a 50% increase in distance travelled on its roads between 2012 and 2022, including a 36% increase in the number of registered cars.  On average vehicles are paying 30% less per vehicle in 2022 compared to 2012, because of the rise of EVs and PHEVs, as well as the emergence of more fuel efficient vehicles generally. 

In Iceland each vehicle owner will be invoiced monthly for distance travelled, which will be estimated based on the national average, until another odometer reading is reported after one year.  After that point motorists will be expected to supply more regular odometer readings.

Of interest is that the Icelandic Government has estimated that even after introduction of RUC, it will still be around ISK160,000 (US$1173) less per annum to drive an EV compared to an ICE vehicle, so that the impact of RUC on purchases of such vehicles is expected to be minimal. 

Some interesting stats from Iceland include:

• 75% of owners of EVs and PHEVs are located in Reykjavik compared to 64% of the population
• 64% of EV and 61% of PHEV owners are in the top three income deciles
• The highest distances travelled by residents are in those located in municipalities immediately surrounding the Reykjavik metro area, lowest by those in more rural areas.  This contradicts some concerns that distance-based charges would unfairly penalise those in rural areas.

Iceland has a population of 373,000 but has one of the highest car ownership rates per capita in the world, with a road network of 12,898km. Iceland is moderately larger than South Korea and Hungary, and smaller than Bulgaria.

New Zealand

NZ has long had a RUC system that applies to heavy vehicles and light diesel vehicles (since 1978), but an exemption for EVs was introduced in 2009 and it was done on the basis that it would be lifted once EVs reached 2% of the light vehicle fleet (which has occurred).  Following the recent change of government in New Zealand from the centre-left Labour majority government to a centre-right National led coalition government, the newly appointed Minister of Transport, Hon. Simeon Brown had announced that RUC will apply to both EVs and PHEVs from 1 April. 

Owners of both types of vehicles will get a two-month grace period to buy a RUC licence, which are available prepaid in blocks of 1,000 of kilometres (e.g. a motorist might buy 1,000 or could buy 100,000 kms, although there is a time limit on RUC expiry in the event of a price increase).  The RUC rate for EVs will be the same as light diesel vehicle at NZ$0.076/km (US$0.046/km or US$0.074/mile), but the rate for PHEVs is NZ$0.053/km (US$0.032/km or US$0.052/mile).  This reflects a calculation that the majority of PHEV distance travelled in NZ is undertaken using electricity (with the difference made up from fuel excise duty paid through petrol).

Owners of both types of vehicles will need to take odometer readings after 1 April and will have subsequent odometer readings verified through annual Warrant of Fitness (WOF) (vehicle safety) checks.

At the end of 2023, there were around 73,000 EVs registered in NZ, and around 30,000 PHEVs.  RUC in NZ is administered by the NZ Transport Agency, which receives all RUC revenue to distribute to road controlling authorities and regional councils (and itself for maintenance and development of the state highway network) through the National Land Transport Programme (NLTP).

New Zealand has a population of around 5.3 million, with one of the highest car ownership rates in the world. Its road network is around 97,000km long. New Zealand is larger than the UK and moderately smaller than Italy.

Similar to Iceland, New Zealand's government has also announced intention to phase out fuel tax as a means of charging for road use, although there is no timetable for that to be implemented. It is likely that following the EV and PHEV RUC introduction, that other ICE powered hybrids would be next to be transitioned to RUC.  That's because petrol hybrids will soon be paying the least of any cars on NZ roads, because their average fuel consumption is around half of the petrol vehicle average.

In NZ a cost-allocation model is used to inform the setting of RUC rates, based on forecasting revenues needs for the forward-looking expenditure in the NLTP, and allocating that based on various vehicle characteristics includes axle load, weight, road space occupancy, vehicle specific factors and on a flat per km basis (depending on the type of spending).  This informs setting of the entire schedule of RUC rates distinguished by weight band and axle configuration.  The light RUC rate is converted into the fuel excise duty rate for petrol, by basing it on the total vehicle kilometres travelled of petrol vehicles divided by the average fuel economy of all light petrol vehicles.  Fuel tax for petrol is then, on average, the same as RUC for light vehicles.  

As petrol hybrid vehicles generally have half the fuel consumption of the fleet average, they pay half as much as petrol vehicles per km, on average, and after 1 April 2024, they will be charged half as much as pure EVs and PHEVs.  It will be important for NZ to shift such vehicles onto RUC within the next few years.  

Iceland likely to be first European country to introduce RUC for light vehicles

Few remember Iceland when discussing experience in road user charging (RUC) in Europe, perhaps because it is an island (and so has virtually no foreign vehicles visiting), and it is also not a member of the European Union (but then neither are Switzerland or Norway). 

Iceland has had for many years a RUC for heavy vehicles, in the form of a fairly simple weight-distance charge on vehicles with a maximum allowable mass of ten tons or greater.  In 2008, it raised IKK1.083b (US$7.8m).  

RUC for EVs and plug-in hybrid vehicles

However, Iceland is about to leap ahead of all other European countries in being the first to implement a nationwide distance-based RUC for electric, plug-in hybrid and hydrogen vehicles from 1 January 2024.  Consultation on a draft Bill (Icelandic only) to implement this charge has recently closed. Iceland Monitor reports that the fee will be ISK6 per km for electric and hydrogen powered vehicles (US$0.043 per km or US$0.069 per mile), but hybrids will be charged only ISK2 per km (US$0.014 per km or US$0.022 per mile), to reflect that they continue to pay fuel taxes. 

Iceland has had a significant growth in electric and hybrid vehicles, with 85% of new light vehicles sold in Iceland in 2022 being electric or plug-in hybrids.  This reflects a VAT exemption for such vehicles, and other very low taxes. 73% of Iceland's electricity comes from hydro-power and almost 27% from geothermal energy, so electricity prices in Iceland are immune from international commodity prices.  Nearly 20% of all cars in Iceland are either electric or hybrid of some form, so the impacts on fuel tax revenues have been considerable.

So Iceland will have surpassed the rest of Europe as no European country has so far mandated or even agreed to introduce some form of distance-based RUC for any light vehicles at all. 

RUC for all vehicles

This isn't the end, as the Icelandic budget indicated that the introduction of the new fee will be monitored in 2024 with an eye to applying it to ALL vehicles under ten tons, and to review the future of taxation of petrol and diesel. This had led to speculation that Iceland could put all vehicles on RUC and reduce or abolish fuel taxes used to fund the transport system. If it does so, then it will be a world-leader in transitioning from fuel taxes towards RUC, and so shifting from taxing energy to taxing road use.

Western Australia to implement RUC for EVs, Auckland congestion charging to be announced, Virginia launches RUC in July 2022

I've been very busy, but there are some announcements worth noting as follows

Western Australia announces it will introduce distance-based RUC on EVs in 2017

As part of an package of measures to incentivise increased sales of electric vehicles, the Western Australian Premier has announced that the state government will introduce 

 introduce a distance-based road user charge for zero and low emission light vehicles commencing from July 1, 2027 to ensure all motorists pay their fair share towards the maintenance and construction of WA roads.

A base rate of 2.5 cents per kilometre for electric and hydrogen vehicles and two cents per kilometre for plug-in hybrid electric vehicles will apply, with both rates indexed to the Consumer Price Index.

This parallels what has already been announced in New South Wales, what has been introduced in Victoria in 2021 and what was also announced for South Australia (but for which the recently elected Labor Government has vowed to repeal).

Western Australia has some history in looking at heavy vehicle RUC, but it will be interesting to see how this may be implemented, as it could be a simple odometer reporting based system given there is little interstate light vehicle traffic. 

New Zealand Government to make announcement on progressing congestion pricing in Auckland next week

It has been studied and investigated for some time, but Radio New Zealand is reporting (alongside other media outlets) that when the New Zealand Government Emissions Reduction Plan is released on Monday 16 May, it will also announce it will implement congestion pricing for Auckland.  It is likely to be focused on a downtown inner city cordon-style scheme at peak times only, but with the potential to expand into corridor charging beyond that. It also appears that the net revenue may be used to offset a cut and eventual abolition of the Auckland Regional Fuel Tax established only in 2018 to help fund transport projects in the city.  That tax is currently at NZ$0.125 per litre including Goods and Service Tax.

Virginia to launch RUC for EVs on 1 July 2022

Virginia will be the third US state to implement distance-based RUC for light vehicles on 1 July according to NBC12.  Branded "Mileage Choice" it will offer EV, hybrid or other ultra fuel efficient vehicle owners the choice of paying by mile instead of paying a flat annual fee for registration (currently US$109 per annum).  Distance will be measuredly a plug-in device supplied by Emovis, with an initial odometer reading captured by smartphone imaging to register.  

Does road user charging harm electric vehicle sales?

RUC makes little difference to EV sales.

Under a year ago I wrote this piece Would RUC for EVs harm sales? largely in reference to concerns in Australia from the Electric Vehicle sales lobby that Australian states investigating road user charging (RUC) based on distance, for light vehicles; would significantly reduce consumers' propensity to buy such vehicles. 

Dr Jake Whitehead from the University of Queensland apparently conducted a study which was cited in an article in Driven that claimed it would hurt sales by 25%, claiming that it would be perceived by drivers as adding $4,000 on the cost of owning and operating an electric vehicle. I demonstrated in my previous article that this was highly questionable, because no purchasers of petrol powered cars estimate the fuel tax they would pay on top of the cost of owning and operating the car. If they did, it might be around A$367 a year for a new petrol Hyundai Kona driving the average annual 13,838km of a car in Victoria. This compared to around A$346 for an equivalent EV paying the Victoria state RUC. Sure I understand Whitehead's estimate, but it simply isn't a valid comparison to think anyone buys a car thinking about the lifecycle costs of charges associated with using the road (although buyers of many commercial vehicles do make such estimates). 

However, there is now some actual evidence, with the latest sales data on electric vehicles in Australia.  You see Victoria introduced RUC (known as the ZLEV road-user charge) at A$0.025 per km for battery-electric EVs (BEVs) and A$0.02 per km for plug-in hybrid vehicles (PHEVs). Both also obtain a registration fee discount of A$100 a year. 

The data for 2021 indicates that 6,396 EVs were sold in Victoria, with 7,430 sold in NSW and 5,342 in Queensland. Given RUC was introduced in July 2021 if Dr. Whitehead's assessment were valid you would expect a significant decline in EV sales relative to other states, but that isn't what happened.

You see the 7,430 sold in NSW compared to the total passenger vehicle fleet in NSW is around 0.17% of all vehicles. Whereas the 6,396 sold in Victoria, compared to the total passenger vehicle fleet in Victoria is around 0.16% of all vehicles.  If it made a difference it was barely discernible, and undoubtedly less relevant than other factors.

In the ACT, the number of EVs sold comprised 0.37% of all passenger vehicles registered in the territory, the highest of any state and territory, but that's not so surprising. The ACT has relatively high affluence, motor vehicle registration is free for two years for EVs, with a 20% ongoing reduction.  

Queensland has a slightly higher number of EVs as a proportion of all passenger vehicles at 0.18%, but that's close enough to NSW and Victoria to suggest that there isn't a significant difference in policy impacts.

Western Australia, Tasmania, South Australia and Northern Territory all have much lower sales, as a proportion of the total passenger vehicle fleet, than the other states, ranging from 0.1% to 0.05%.  In shortsthere is a great deal of reluctance to buy EVs in Australia, but the wealthiest eastern states/territory have better sales.  Note that both NSW and South Australia announced they would introduce RUC from 2027.

So from that I conclude that RUC in Victoria has made virtually zero difference to EV sales in the state. 

That's with a RUC rate of A$0.025 which is equivalent to US$0.029 per mile or £0.02 per mile or €0.016 per kilometre. That is higher than some US states have implemented or are proposing, but much lower than would be a replacement rate for fuel taxes in any European countries.

A higher rate might make a difference to sales. Certainly New Zealand has maintained an exemption from its RUC system for EVs, which would have resulted in them being charged NZ$0.076 per km (A$0.071 per km, €0.045 per km, US$0.08 per mile or £0.06 per mile). Exemption EVs from RUC has undoubtedly contributed to greater sales per capita than in Australia, but I suspect other factors, including price of electricity and the network of charging points matter as well (plus less range anxiety in a smaller jurisdiction).

What it means is that RUC, as a policy tool, needs to be considered within the context of a wide range of pull and push factors for jurisdictions that want to encourage sales of EVs. 

Making Road User Charging work in the UK: Part One - it's got a problem

Nothing to see here! This is the response you might give to the Chancellor of the Exchequer (UK)’s latest budget (PDF) in terms of the future of revenue from UK road users. Well not strictly true. For the twelve year in a row, the Government has frozen fuel duty (it officially is meant to inflation adjust it, but this has not happened now except once, under the Conservative/Liberal Democrat coalition in the Government’s first term). This is estimated by Treasury to cost £1.51 billion (US$2.05 billion) in 2022/23 alone, but the net impact over that time has been to erode the value of the £0.5795 per litre (US$2.99 per gallon) fuel duty significantly. If it had been adjusted it would be £0.78 per litre (US$4.01 per gallon), meaning it has already lost almost 26% of its value, although arguably if it had been inflation adjusted there would be slightly reduce demand, so the revenue loss is far from linear (and indeed it is a gain in the hands of households and businesses).

So this is quite some problem. It's not quite the US scenario, which has seen the US Federal Gas Tax not increased since 1993, at US$0.187 per gallon, which translates into a mere £0.035 per litre. Even California, which has the highest state gas tax, only adds £0.129 per litre.  So even around £0.16 per litre in the US isn't anywhere near £0.5795 per litre in the UK.  What it means though, is that fuel tax in the UK is much much more important than in the US, and the key reason being, it isn't about paying for roads, it's just another tax.

What do existing motoring taxes raise?

Fuel duty does raise £28 billion (US$37.9 billion) per annum as it stands. 

Related, but much simpler to resolve, is declining revenue from Vehicle Tax (formerly known as Vehicle Excise Duty (VED)), which is basically registration fees. The decline is purely due to the zero rating for new electric vehicles, which could easily be addressed by introducing fees for such vehicles. VED raises £7 billion (US$9.5 billion) a year. There might be a case for shifting away from a fixed fee to pay for roads to a usage-based fee, to encourage change in behaviour, and better reflect externalities, but that’s another story. 

The real issue is that the UK Government has a whole series of policies that result in declining fuel tax revenue. The main one being the prohibition on the sale of new petrol and diesel light vehicles from 2030, supported by £620 million (US$840 million) in public spending to fund plug-in charging points for electric vehicles. Of course, all of this is driven by UK Government commitments on climate change, so the issue arises as to whether the UK can manage with fuel duty revenue declining or if it will want to replace it, and if so with what?

Road user charging (RUC) is an obvious answer, but unlike in the United States, the revenue collected from fuel duty is many times the spending on roads in the UK. The latest budget (which only reflects England), seeks the Department for Transport spending £6.4 billion on roads, £5.6 billion which comes from VED (the remainder of VED is allocated to Scotland, Wales and Northern Ireland as devolved administrations). Adding fuel duty and VED revenue sees £35 billion raised almost entirely from road transport, even though spending on the sector is a fraction of that. A shift towards RUC to replace revenue becomes qualitatively and politically challenging if it is revenue, not only to pay for roads, and even public transport, but for general spending purposes. RUC, after all, is much closer to a fee set to recover costs, not a general tax. Nowhere has RUC been introduced just as a tax to raise revenue for general government spending (although Singapore’s Electronic Road Pricing (ERP) system, which is a congestion pricing scheme, sees all net revenues treated exactly like that – but its objective is not to generate revenue).

UK history of RUC

The history of attempts to introduce RUC in the UK matter as well. Let's also NOT muddy the waters with related, but fundamentally different policies. For a start, tolls are insignificant ( a full list here) in their role in paying for roads in the UK. Beyond a few bridges and tunnels, and one motorway near Birmingham (M6 toll), they have not been widely used. Similarly, congestion charges are not really relevant here. There are two in the UK, London and Durham, and both are in place to manage traffic, not raise revenue. 

From 2001 until 2010 there were three connected but separate attempt to introduce road pricing, which varied on scale, scope and to some extent, objectives.

First, the Lorry Road User Charging (LRUC) project, from 2001-2005, which was both to recover revenue from foreign lorries, but also to become a first step in introducing national road pricing. It would have priced all UK roads by vehicle weight, but also a broad-based time of day (night/day) and location (cheaper on motorways), using the now widely applied GNSS telematics technology. It folded for several reasons, not least being cost and the low level of expected new revenue generation. It was led by Her Majesty’s Revenue and Customs (HMRC), which raised questions about the incentives around governance for a project requiring high levels of customer service, user acceptability and ultimately application of transport economics. (More recently, the UK introduced the HGV Road User Levy to raise revenue from foreign trucks, essentially implementing a European-style vignette scheme)

In 2005 it was replaced by the National Road Pricing project, which sought to reduce congestion and emissions by implementing full scale time of day, distance and place (TDP) road pricing for all vehicles on all roads.  It was meant to be a 15 year programme, but it collapsed in 2007 due to public opposition, and was folded into the Transport Innovation Fund (TIF) programme to support proposals from local authorities for congestion charging. No actual congestion charging schemes resulted (although Manchester came close, until local politicians decided a referendum was necessary to obtain support to proceed), and with the change of government in 2010 that was the end of further measure by the British Government to promote road pricing.

How hard is this?

The politics around this are brutal. Over 1.7 million people signed a petition opposed the National Road Pricing project, and polling has regularly indicated large majorities opposed to the idea. In 2010, a paper written for the RAC Foundation by Dr John Walker included a poll indicating that a majority would support reforming how roads were paid for, but was not supportive of congestion pricing. Bear in mind that the MAIN objective for all of the previous attempts has been to reduce congestion, which at the time required all vehicles to be equipped with GNSS based telematics systems. Headlines about “tracking your movements” scared many about government interference in privacy. Even more critical, given the previous Labour Government had a policy of increasing fuel duty higher than inflation, year after year, few would believe that same Government would actually cut a tax to introduce road pricing, so on average, people wouldn’t pay more.

So introducing road pricing/RUC in the UK to manage congestion is unlikely to gain much support, but what about introducing RUC simply as a replacement of fuel duty?

The House of Commons Transport Committee recently held an inquiry into both electric vehicles and road pricing, and has yet to issue its report on the inquiry (it most recently heard oral evidence in mid October). However, from the evidence seen so far there is every risk that the UK will repeat some of the previous mistakes. This includes:

· Treating the whole exercise as being mostly if not entirely about revenue-raising, which is understandable if it is led by HM Treasury and HMRC, but does not encourage public support and is unlikely to be seen as acceptable politically.

· Turning only to European experience as particularly relevant, when in the past decade it has been the United States that has moved much more rapidly and, in some cases, nimbly, to test and implement small-scale RUC systems designed to replace fuel tax revenue. Australia also has some lessons that may be drawn upon as it considers whether to replace fuel tax and registration fee revenue from heavy vehicles, and some states introduce RUC for light electric vehicles.

It’s worth reminding those from countries where hypothecating fuel tax for road funding is standard practice that this is NOT what happens in the UK, this is treated as “just another tax”, with no link whatsoever to any spending. This is a position held firmly by HM Treasury, because of fear about what would happen if there was “too much revenue raised” or indeed “too little”, which reflects a position whereby governance, funding decisions and the structure of the highways sector is largely unchanged. Bear in mind, that the creation of Highways England (now National Highways) as a company, with a five-year funding settlement, drawn from VED has already broken away from this model.

Clearly the number one barrier to implementing RUC in the UK is public acceptability and the politics around this, but to address that there needs to be a significant change in the mindset around how motor vehicles are taxed/charged, how the revenue is used and what governance arrangements need to be put in place to support that.

Even if there were to be growth in the scale of spending on roads in the UK, and indeed that might be justified given the backlog of maintenance particularly on local roads (and in some cases, the paucity of local authority interest in capital spending due to funding constraints), it is not going to be anywhere near the scale of £35 billion per annum. The “right” amount is unknown because the lack of price signals and useful data on revenue raised doesn’t indicate what should be spent on the network, but given that motor vehicle owners and users are clearly willing to pay £35 billion a year to own and operate their vehicles, it is likely to be higher than at present. However, the question may well be reasonably asked as to whether the road networks, in their entirety, shouldn’t be generating returns on capital, that could then, reasonably, be treated as dividends able to be applied to other public spending. A return on capital and a carbon tax might be ways to address the revenue gap between road spending and current revenues from motoring taxes, but all of that needs some more revolutionary thinking that has largely been absent from the debate to date.

So what could the UK do? That’s the subject for a future post.

Road pricing is the answer, but it is best to start from first principles

The costs of maintaining and developing a road network are often not calculated on the same basis as other infrastructure or other assets. In many jurisdictions roads are not given a capital value, whether it be replacement cost or (more usefully) economic value as an asset generating wealth. The concept of depreciation is not applied, so there isn’t an economic basis to calculate the life-cycle costs of a road. Capital spending on roads is frequently just “written off” when it is spent, unless the road is debt funded and perhaps supported by tolls. 

Traditionally justifications for road funding have been based on engineering assessments alone, rather than looking at service to end users and optimisation of costs.  Cost optimisation would see depreciation taken into account, so that maintenance is undertaken on a long-term optimal basis, rather than just reactive to emergencies or to political demands. It’s grossly inefficient to take the latter approach, as it inflates costs over the long-run, offering few chances to spend more upfront on renewal of road sub-structures and surfaces for a longer life, and to manage the asset pro-actively.  Equally as important, reactive approaches are not conducive to quality of service. It is not often that politicians or civil servants talk of road users as “customers” or of providing a high standard of service to them, yet this is what they are.

So the primary objectives around spending on road maintenance and renewal should be about sustaining an appropriate level of service for those using it. Any additional capital should be about improving levels of service, whether it be improving safety, reducing congestion, allowing larger or heavier vehicles to use a corridor valuable for freight, reducing journey travel times etc. and should reflect some analysis as to whether it is both economically justifiable and if it addresses road users’ priorities.  

 Ideally, once there is a clear forward-looking strategy, with the right incentives to deliver improved levels of service to road users, then the question as to who pays and how much should be considered in some detail.  Who pays, by how much and by what means can follow on from that. 

So an article in CleanTechnica on 20 September 2021 titled “Is Road Pricing The Way To Equalize Electric- & Gas-Powered Vehicles?” asks some questions and presents some answers.

 The article correctly reflects the problem, which is that fuel taxes are not longer sustainable proxies for “user pays” to pay for roads in many jurisdictions.  In jurisdictions where fuel taxes bear no relationship to what is spent on roads (see the UK and most other European countries), it is a wider pressure, noting that taxes on fuel are used to bolster general government spending.

Plug In America, a lobby group for electric vehicles, not surprisingly argues that road user charging on EVs would both hinder the transition to such vehicles and not raise enough money.  Both of those claims need further scrutiny at a later date.  

 Another claim is that EV owners already pay enough taxes for road maintenance through other means, like general sales taxes on new vehicles. It quotes a questionable report from Arcadia Center in 2018 that this indicates that such owners pay more than owners of vehicles with internal combustion engines. The only basis by which this makes any sense is for Massachusetts which hypothecates sales taxes for new motor vehicles into the Commonwealth Transportation Fund.  So this is not applicable for jurisdictions that do not do this, but it is also worth noting what a bizarre policy that is. Imagine if sales taxes on electrical appliances were used to fund maintenance of the electricity distribution network, or sales taxes on mobile phones to pay for cellular networks.  The tax is legally avoidable by buying a vehicle out of state and registering it there, and it is inequitable as it bears zero relationship to how much of the road network is used. Sure this applies to ALL types of vehicles, but it is hardly a solution that is efficient or equitable.

The CleanTechnica article proposes several solutions:

Increasing the gas tax is an option, but is dismissed rightly because although it would accelerate a transition to electric vehicles, it would be unfair to those who cannot afford them. Increasing the gas tax is only appropriate if it is part of equalising across what all vehicles pay, not just those paying the gas tax.

Fixed fees for EV owners: This is dismissed as being higher than what some owners of other vehicles pay in gas taxes, which will be true for some, albeit that any fixed fee is good for those who drive a lot, and is not good for those driving a little. In any case, although there is a case for recovering some road costs from fixed fees (because of the proportion of road maintenance costs that are fixed), there is a better case to recover more from usage-based fees in order to recover the most from those that use the network the most (and to help address externalities).

Taxing the electricity EVs use: The Arcadia Center article proposes this, but it lack merits. The CleanTechnica article notes it is technically difficult and could hinder take up of EVs. Technical difficulty (and difficulty to enforce in some cases) is entirely valid, although the idea it might hinder take up of EVs seems no more valid than applying it to other types of fee. If the problem is paying for the roads, then objecting to any measures because they may put off purchases of EVs, means a balance has to be struck. Regardless, surveys indicate for most people one of the main reasons not to buy an EV is upfront cost, which suggests that any tax breaks or subsidies are best placed at purchase. In other words, Massachusetts would encourage MORE EV sales if it exempted them from the sales tax, and implemented a distance-based road user charge, than trying to recover the same revenue from taxing the purchase of the vehicle.

Road pricing: Four types are listed:

·      Flat rate per-mile: This is the classic road user charge, but the article suggests it could vary by weight (yes for heavy vehicles), fuel consumption (why?), emissions (yes, this can be done) and damage done to the road network (well that’s weight really).

·      Geographic/toll-based charging:  This really isn’t a solution to replace the gas tax for EVs, as it is route or location specific.  The description is more like a congestion charge, which is fine, although that has a different purpose and shouldn’t be confused with RUC.

·      Time-based rate:  The idea that you are charged a fee by minute has never been implemented anywhere.  It has one major negative externality, it rewards excessive speeding and running through red-lights.  It’s not a good idea.

·      Dynamic rate:  Dynamic rate of what?  This could just be a dynamic distance-based rate, which is basically applying congestion charging to RUC.  It is described like using a toll tag, which wouldn’t be useful on a network wide basis.  So this isn’t really useful to replace the gas tax, unless it is just a further evolution of RUC.

Now this article is positive, as it advances the value of road pricing and suggests a whole set of principles which are largely worthwhile and agreeable, but I want to suggest that the problem (not enough money to pay for the roads) should start with identifying exactly what it is money is needed for, how that is assessed and then to work out who should pay what.  

This means having asset-management systems for roads, it means accounting for roads in the same way as other assets, and developing a cost-responsibility approach to work out who should pay for what costs (and there are multiple options to address that), alongside the means to recover those costs. Fuel taxes have been easy for a long time, but their time is running out.  Fees based on distance, vehicle characteristics, and some element of location are likely to be better, but any such system should seek to balance the need for price signals vs. the need for a relatively simple way to charge user fees.  One reason for this is simply to gain acceptability from road users.  It isn’t just about raising money, it should be about delivering better outcomes for those who pay.

Would RUC for EVs harm sales?

With the State of Victoria's announcement of road user charging (RUC) for electric (EV) and plug-in hybrid vehicles (PHEV) there have been quite some claims from various circles about how allegedly damaging RUC could be for sales of such vehicles. 

According to The Guardian:

A coalition of car manufacturers, industry groups, infrastructure companies and environmentalists have branded the Victorian government’s proposed electric vehicle tax the “worst electric vehicle policy in the world”.

The more recent announcement about incentives to purchase EVs should help ameliorate this concern, but it remains a moot point as to whether RUC actually disincentivises purchases of EVs.

The incentives package is as follows:

• Subsidies for 20,000 EVs to be purchased, of up to A$3,000 per vehicle for vehicles priced under A$69,000;
• A$19m to be spent on EV charging infrastructure across regional Victoria;
• A$20m for a zero-emissions bus trial;
• A$10m to purchase 400 new ZEVs for the State's own fleet;
• A$5m for a Commercial Sector ZEV Innovation Fund; and
• A$298k for a study on "EV-readiness" in new buildings.

A report by the ABC (Australia) noted that there are only 7,000 EVs registered in the State of Victoria and 20,000 across Australia (for comparison this is about the same number as New Zealand, which has one-fifth of the population of Australia).

The criticism about the RUC came from an advertisement placed by a group consisting of Hyundai, Volkswagen, Uber, Jetcharge, the Clean Energy Council, Solar Citizens, Doctors for the Environment Australia and the Australia Institute.  

There may be legitimate concern about a lack of adequate incentives to purchase EVs in Australia, and that point is worthy of debate. Luxury car tax imposes a 33% penalty on "fuel-efficient vehicles" with a retail price of A$77,565, and could well be waived for such vehicles as it effectively penalises the mid to larger size EVs.  However, can a RUC of only A$0.025 per km really harm sales of EVs?

The Driven reports on a "preliminary study" from the University of Queensland that claims just that, claiming that it could hit sales by 25%. This report deserves some critical scrutiny. After all, when New Zealand RUC exemption for EVs ends (currently scheduled on 31/12/2021, but it may be extended), NZ (light) EVs will be paying the RUC of NZ$0.076 per km (about A$0.07). In Utah such vehicles are charged US$0.015 per mile (A$0.012 per km) up to an annual cap of US$120 (about A$155). In Oregon they are charged US$0.02 per mile. Hawaii, California, Washington State, Colorado, Minnesota, Delaware and Pennsylvania have all piloted (or are currently piloting) such charges, are they all about to do something that could dramatically undermine EV sales? 

Is RUC factored into the purchase price of a vehicle by consumers?

Jake Whitehead "an electric vehicle research at the University of Queensland who also works on the global stage with the International Panel on Climate Change (IPCC) and the International Electric Vehicle Policy Council" is cited as claiming that Victoria's EV RUC will be "perceived" as a A$4,000 disincentive to buying an EV.  This claim is highly questionable.  The report claims:

It would mean that, for example in the case of the petrol Hyundai Kona which costs $24,300 before on-road costs, the all-electric version would in effect cost $63,990 instead of its manufacturer recommended $59,990 price.

At a rate of A$0.025 per km, it is taking the cost of the RUC over 160,000km as a factor that vehicle purchasers take into account when buying a vehicle.  There is no evidence that this happens anywhere where RUC exists for EVs (or indeed any other vehicles now).  A parallel to this would be that purchasers of petrol powered vehicles make the same comparison when purchasing the car, based on the next 160,000km they drive based on fuel tax alone and the vehicle's average fuel efficiency.  So looking at a new petrol Hyundai Kona (which is actually listed at A$28,990)  its combined fuel efficiency is listed as 6.2l/100 (I'll assume the Smartstream G2.0 Atkinson engine not the Smartstream G1.6 T-GDi).  So for 160,000km it will use on average 9920 litres. At A$0.427 a litre, that means the price of the petrol Kona is "perceived by consumers" at around $4,235 more than the retail price (A$4658 if you include the GST on fuel duty). Who does this? I'd wager that next to no consumers do any sort of calculation like this, based on what taxes they pay on using the roads. Besides, the average car in the state of Victoria travels about 13,838km per annum according to Budget Direct.  So what this really means is that RUC on EVs will be a cost of around A$346 in a year (and for the sake of argument, for the petrol Kona it is A$367).  So the net impact is that the EV is still cheaper to own from a user tax basis.

At best this claim is only half-valid when it isn't compared to the fuel tax paid by other vehicles, but at worst it demonstrates that the real impact is a tiny increment, and certainly much less than the depreciation from simply purchasing the vehicle in the first place.  Note that Whitehead is quoted in the AFR as noting the average annual distance driven is around 13,000, so he is not unaware of this statistic.

Will EV RUC reduce the supply of EVs?

The report claims that a whole host of incentives would increase EV sales, mainly subsidies on electricity, exemptions from other taxes and tolls. However, the report has a series of claims that without seeing the actual paper itself are difficult to completely assess. One is that RUC would effectively mean that manufacturers would "withhold supply" of EVs to the Australian market because they would be "difficult to sell".  The evidence for this is unclear, but there is little sense from EV suppliers that would pull out of NZ when its RUC exemption lapses (and results in EVs in NZ being charged three times what they wil lbe in Victoria).  There is a disincentive for EU manufacturers selling outside the EU when they face penalties for selling internal combustion engine (ICE) powered vehicles (and get credits for selling ZEVs), outlined in this article by the ABC, but it seems unlikely Australia could fully offset this without parallel subsidies. In effect, Australia's market is fighting against governments with deep pockets, and that is a wholly different political issue.

The report claims that "EV owners already pay a significant amount in road taxes under the current model" which for an academic paper is really only a value judgment when it is clear that this "significant amount" is a fraction of what other vehicles are charged. A petrol Hyundai Kona will be charged A$834.80 in registration fees in Victoria, but an electric one will be charged A$100 less.  What the report claims is that they then pay a "significant" amount, when they pay nothing in fuel duty, whereas the petrol Kona will be around A$367 per annum based on average usage.  

What is the basis of this research?

The report from The Driven doesn't contain details of the methodology of the University of Queensland paper.  However, The Guardian in November 2020 did reveal that:  

Whitehead’s study, which has not yet been peer-reviewed and has been released earlier than planned in the wake of the state government announcements, included a survey of 500 Queensland households on their preferences on road pricing.

They found a 2.5c/km tax was seen as being equivalent to a $4,500 increase in a vehicle’s purchase price. By comparison, a $5 congestion tax charged on driving in inner-city areas, capped at $15 a day, was seen as equivalent to adding $2,800.

So the basis for the modelling in this report is a stated-preference survey (which has not been revealed) which has somehow led those surveyed to conclude that they would perceive EV RUC as being around the same as driving 156,000.  This is equal to 11.5 years of vehicle ownership. Do consumers also look at registration fees over that period?  Do they look at maintenance costs or indeed more important than all of these the relative fuel costs vs. electricity costs of a petrol vs. an electric vehicle, over this period?  Sure they will consider it in a shorter term, but over 11.5 years?

Even more absurd is the idea that the study could model a stated preference survey for congestion charging.  If this is seen as $2,800, assuming this is based on a similar period as the A$0.025 of RUC (11.5 years) then it is assumed the average driver enters the congestion zone, 49 times a year.  This is an odd figure, as a regular commuter to such a zone might be assumed to enter around 200 times a year, whereas most other drivers might enter it rarely (in London around half of all vehicles entering its congestion charge zone only do so once every 6 months).  The point then being "so what"? Why would it be a GOOD thing for EVs to be exempt from driving into downtown Brisbane or Melbourne?  They cause congestion, that congestion increases emissions for other vehicles (including commercial vehicles with fewer choices), and Australia's major cities are heavily focused on encouraging public transport and active modes for travel downtown, not cars?  London has announced that the ZEV 100% discount for its congestion charge will be abolished in the end of 2025. Cars generate congestion after all.

In short, the basis for the study that claims that Victoria's A$0.025 RUC would somehow devastate EV sales and emissions targets appears to be flimsy.  It isn't necessarily surprising that automotive companies are happy to go along with these claims, but for a "think tank" to align itself with such research is disappointing.

Conclusion

There is a valid debate to be had about how Australia at state/territory and Federal levels about incentives for purchasing EVs. Victoria's recent announcement seems to clearly indicate that its RUC for EVs and PHEVs is only part of its policy package, and should ameliorate concerns.  However, the case for RUC for EVs is clear, in that it is easier to introduce such a policy when vehicle numbers are low, so that the message that EVs do not get to use the roads for free is clear.  There are obvious benefits for replacing petrol and diesel vehicles with EVs and PHEVs, in terms of improving local air quality and reducing greenhouse gas emissions from vehicle use, but there are also benefits in sending direct road use cost signals to road users in the form of RUC.  This can be lower than fuel duty, and it is a step in the right direction for hypothecate such revenue initially to support capital spending on EV infrastructure and then the road network. Longer term such vehicles can reasonably be expected to be paying their fair share of the total costs of maintaining and developing the road network, and as such not to be cross subsidised by others, nor to have inappropriate signals sent about driving in an urban environment, such as having an exemption from any future congestion charges.