Iceland's world first: What does it teach others?

Ten years ago nobody talked about Iceland and road user charging.  Even five years ago there was little thought given to the small European island, which is both outside the European Union and inside NATO.  With a population barely exceeding 400,000, it ranks alongside the Bahamas and Brunei in numbers.  In economic size it sits alongside Honduras, Cyprus and Georgia, although in GDP per capita (PPP) it exceeds Australia, Germany, Japan, France and Saudi Arabia.   Iceland's land area is slightly smaller than Guatemala, but larger than Hungary, south Korea or Jordan.  It's more than double the size of Switzerland or the Netherlands.  However, its road network is small in length, akin to Burundi and smaller than North Macedonia. It has a similar road density to Australia, indicative of a vast area of undeveloped land.

Around 64% of the population of Iceland lives in the Reykjavik metropolitan area. Around a fifth of its population are immigrants, a quarter of whom are Poles. 93% of the population speak Icelandic, but around 98% know English.

The point of all this is to note it is unique in many ways, but it is not especially small compared to many countries. It certainly is a high-income country, and has a notable number of immigrants as a proportion of population.

Given all that, the launch on 1 January 2026 of the world's first all vehicle road user charging (RUC) system is notable as an achievement. 

I wrote before about the launch of EV/PHEV/Hydrogen light vehicle RUC as a big step forward and then again in 2025 it was confirmed that Iceland would transition all vehicles to RUC, and abolish fuel tax. 

Not only is it an expansion of scope of the EV/PHEV/Hydrogen vehicle "kilometer tax", but it also appears to replace the heavy vehicle kilometer tax that has been in place since 

How is it being implemented?

Electric, plug-in hybrid and hydrogen light vehicles have been subject to the fee since early 2024, so will continue to pay as before.  They comprise around 16.5% of the vehicle fleet as of the end of 2025.  Around a third of cars sold new in Iceland in 2025 are battery electric vehicles, with another 21% cars sold being plug-in hybrid vehicles.  

As the fee applies for distance travelled in January 2026, it is expected that an odometer reading will be submitted on 1 February 2026 (with the deadline of 14 February for submitting it).  Those that have not submitted a reading for distance travelled in January will be assessed based on the average distance travelled by a car in Iceland during the month of January.  This is the basis for future fee payments. Either provide a measurement or be invoiced for an average.

If no odometer reading is made by 1 April 2026, a fine of ISK20000 (US$164.28) will be levied and it will be mandatory for the vehicles to be driven to a vehicle inspection point to have the odometer read.  On this occasion, vehicle owners will have 30 days to do this after 1 April.

There are various options for vehicle owners to submit odometer readings:

• The Icelandic Government's "island.is" app;
• Icelandic Government's internet portal account;
• N1 app (app for a  fuel, EV charging station and convenience store chain)
• At scheduled vehicle safety inspections (Most vehicles are required to be inspected annually)
• Scheduling an odometer reading at a vehicle inspection station.

Vehicles up to a maximum registered weight of 10 tonnes (and rental cars) must submit a reading at least once a year, but may do so every 30 days.  Vehicles above that weight must submit a reading at least once every six months, but can submit new ones at a time. 

Given the legal requirement for vehicle safety inspections, this becomes the primary enforcement mechanism.

Change of ownership triggers a requirement to report the odometer reading at that point, so that the previous owner can be invoiced for the final amount, and the subsequent one has the account for the fee.

There are no telematics based options in Iceland at present, although it appears likely that there will be a strong case for enabling this for trucks with trailers at least, to reduce compliance costs.

How often must you pay?

Vehicle owners are required to pay monthly (with 14 days to pay after each invoice). The choice being whether to send an odometer reading so that it is actual distance driven, or to have an estimate calculated. Estimates will be based on previous readings, or if not available, but the average reading by vehicle type calculated by the Directorate of Internal Revenue (which for cars is 40km per day). 

How much are vehicles being charged?

The rate structure is based on registered vehicle weight as follow (US$ are rounded estimates based on today's conversion from Icelandic Krona.

Vehicle class/weight	ISK per kilometre	US$ per kilometre
Motorcycle/moped	4.15	0.034
0 – 3.5 tonnes	6.95	0.057
3.5 – 5 tonnes	9.85	0.08
5 – 6 tonnes	10.44	0.086
6 – 7 tonnes	11.06	0.09
7 – 8 tonnes	11.73	0.096
8 – 9 tonnes	12.43	0.102
9 – 10 tonnes	13.18	0.108
10 – 11 tonnes	13.98	0.115
11 – 12 tonnes	14.81	0.124
12 – 13 tonnes	16.29	0.134
13 – 14 tonnes	17.92	0.147
14 – 15 tonnes	19.71	0.162
15 – 16 tonnes	21.68	0.178
16 – 17 tonnes	23.86	0.197
17 – 18 tonnes	26.25	0.215
18 – 19 tonnes	27.37	0.224
19 – 20 tonnes	28.55	0.234
20 – 21 tonnes	29.77	0.244
21 – 22 tonnes	31.06	0.255
22 – 23 tonnes	32.40	0.266
23 – 24 tonnes	33.79	0.277
24 – 25 tonnes	35.24	0.289
25 – 26 tonnes	36.75	0.301
26 – 27 tonnes	38.04	0.312
27 – 28 tonnes	39.36	0.323
28 – 29 tonnes	40.74	0.334
29 – 30 tonnes	42.17	0.346
30 – 31 tonnes	43.65	0.358
Over 31 tonnes	45.17	0.37

Buses get a 10-30% discount for the first three years, and electric, hydrogen, methanol and methane powered heavy vehicles get an 80% discount for the next five years. 

Trailers with registered weights over 10 tonnes face similar fees as powered vehicles do in the above table.  Trailers are not required to be fitted with hubodometers (as in New Zealand), but those that do not have the fees added to the powered unit, with an independent recording needed to be made by the owner of that unit for distance travelled with trailers (it seems likely that this could be a compliance issue). 

Exemptions

Three categories of vehicles are exempt:

- Vehicles for use by rescue teams

- Vehicles registered no later than 1 January 1965 or earlier if demonstrated that the vehicle has no odometer and cannot be equipped with one

 - Vehicles owned by foreign embassies and diplomats.

Fuel tax?

On 1 January 2026, fuel tax was abolished in Iceland, resulting in a reduction in the price of petrol and diesel by around US$0.656-0.738 per litre on average (with some petrol dropping by around US$0.78 per litre).  This is a reduction of around 30% in the price of petrol and diesel overall.

Revenue from the new system is expected to be akin to that from fuel tax, being around ISK22 billion (US$180 million) per annum.

Lessons to draw?

It is possible to rollout a simple odometer based RUC system, with easy means to report distance travelled using apps as long as it is backed up by a regular vehicle inspection system that provides solid evidence of distance travelled from each vehicle.  Together, it means that there is a backup that reduces the risk of fraud.

Invoicing vehicle owners monthly, either by actual or estimated distance travelled means RUC can be seen as more of a utility bill, than a toll or an irregular tax.

Having the option of estimated bills helps to lower the burden for those who don't want to report distance regularly, but also incentivises vehicle owners to report distance to get exact invoices.

Starting with a smaller proportion of the fleet (EVs/PHEVs) reduces risks of any system, because it can provide a bedding in of the business rules and processes with a smaller number of customers (and in particular, ones more likely to be compliant).

Abolishing fuel tax at the same time as rolling out RUC for all vehicles, helps build public acceptance and trust that RUC exists to replace fuel tax, but it is unclear how easy it would be to introduce RUC for all vehicles in one step, if the vehicle fleet were significantly larger.

Having a RUC rates table based on weight classes is likely to better reflect the different levels of wear and tear on the network based on weight, noting that fixed costs don't vary by vehicle weight.  However, I question whether one tonne increments are necessary from 5 tonnes upwards, rather than wider bands to reflect averages.

Sure, Iceland has a small population, with many concentrated in one city, and it has little cross border travel  (so there is no need for any sophisticated means to distinguish distance travelled outside the country or to tax visitors' vehicles, as this happens infrequently), but it has the foundations of a functional, efficient system to collect revenue and send reasonable price signals as to paying for the costs of providing road infrastructure.  

There was some opposition to the tax, mainly from vehicle retailers concerned the tax would suppress EV sales, which it appears to have initially done, but there remains significant savings from owning an EV compared to a petrol vehicle, based on operating costs. 

It's early days to determine how much non-compliance there is, which will be important to watch. In particular, whether it affects vehicle registration compliance or if residents of rural areas may be less compliant.  

One thing to note is Iceland largely did all of this without a pilot, and without an extended period of detailed design and testing.  Iceland had a small amount of help in the early days, but between showing interest in RUC and putting all vehicles on it, has been a period of under five years.  The contrast with pretty much any other jurisdiction is astonishing, and perhaps demonstrates a clarity of policy objectives and assessment of options that other jurisdictions could do well to emulate.

California's Road Charge - A study in policy paralysis

Forbes Magazine recently published an article headlined "California Mileage Tax—Pilot Programs And Permanent Policy Inertia" by Andrew Leahey. It noted that California has been studying road user charging (which it calls Road Charge for a reason that is banal and barely worth noting) for nearly 10 years and there is next to no indication that the state will be implementing distance based road user charging soon. 

This is despite nearly hysterical media coverage in recent weeks because of legislation that will essentially continue the status quo for another decade.  This is adequately answered by this article in The Californian, but it is fairly damning of the California Road Charge program that this sort of coverage repeats.  

The idea that it would be "extremely intrusive" to implement RUC is highly misleading. The idea that it is "inequitable" to charge according to how much distance is travelled, is extraordinarily simplistic (after all, what does the gas tax do?), the idea that rural locations will suffer the most was refuted by research undertaken by RUC America years ago. What is unfortunate is that so much work has gone into pilots and studies in the state, but poor knowledge about the concept remains.

California has run pilots which have demonstrated success and generated plenty of useful data. The first pilot was one I worked on, which had over 5,000 participants, testing a range of mileage measurement and reporting options, and considering what the public response was to it.  Since then California has run further pilots and studies, all examining more detailed elements of how "Road Charge" might be implemented, but there is no political mandate to actually introduce it.

In short, while many politicians and public servants know that California will have to introduce a means to charge electric (and hybrid and more fuel efficient vehicles) to use the roads, and it almost certainly will involve charging by distance, the actual political courage to advance it to implementation isn't there. As a result, there is a willingness to keep a program of investigating road user charging going, in perpetuity, until the time comes.

In the period California has been studying road user charging, Hawai'i has piloted and implemented an actual revenue raising program (as of last year), albeit it is currently an option for EV owners instead of paying a flat annual fee.  Likewise Virginia has implemented a revenue raising program, as has Utah (Oregon was already operational in 2015).  Iceland has gone from investigating to rolling out road user charging for ALL vehicles on all roads as of the past month.

Meanwhile, 4.3% of light duty vehicles in California are EVs, 5.4% are hybrids, 1.3% PHEVs (Source). That's around 34% of all light duty EVs in the United States.

There are no great technical issues hindering the introduction of Road Charge in California, but rather political ones, which seem astonishing in a state where the Democrats have 75% of the seats in the State Assembly and State Senate, as well as the Governorship of the state.  

California's Road Usage Charge Technical Advisory Committee was set up by legislation in 2014 and a Bill before the State Assembly will extend it till 2035.

Leahey's article states:

What is really being tested is not a system, or the finances, or even the equity. What is being tested is political tolerance. The pilot is determining how long the state can talk about a road usage charge, create advisory boards, and extend pilot frameworks without triggering significant backlash or having to actually legislate the hard decision.

In other words, California will watch other US states implement road charging, and at some point there is hope that it will be just a formality, because few politicians are willing to stake any political capital on the outrageous idea that... the use of all cars, regardless of energy source, should be charged to pay for the costs of maintaining and renewing the road network.

Of course California has taken another approach, which has been to raise the state's gas tax.  It was increased by US$0.12 per gallon (US$0.0317/litre) in November 2017 and again by US$0.056 per gallon (US$0.015/litre) in July 2019.  Since then, legislation has mandated an inflation adjustment to the gas tax every year from 2020, meaning it is now US$0.612/gallon (~US$0.162/litre).

This is the highest state gas tax in the USA, so in effect California has been incentivising a shift towards more fuel efficient, hybrid and electric vehicles by taxing gasoline powered vehicles more.

There is a flat fee on EVs of US$175 per annum, but this is lower than the average gas tax paid per annum for a gasoline car.  The effect is that around 11% of car users in California are paying less to use the roads than others.

Is that the worst outcome? Probably not, although it costs California taxpayers the resources to keep officials occupied, and pay for consultants to update information. It is entirely plausible by the time California gets to actually implement Road Charge, that there are fair questions to be asked about data collected in 2017 and its relevance. Certainly there is some ongoing technological and cost evolution in that time.

Meanwhile, I can only hope that any future narrative about road user charging in California isn't about it being a "new tax" but a replacement, to level up what vehicles are charged to use the network.

(oh, and the reason why it's called "Road Charge" and not a "road usage charge" or "road user charge", is because it was thought that the acronym RUC rhymed with a rude word.  I had no idea such a word was so blasphemous in the state of California!)

UK to implement road user charging for EVs and Plug-in Hybrids - called eVED

As was widely forecast, the UK's Chancellor of the Exchequer, the Right Honourable Rachel Reeves, announced in the 2025 Budget that the UK will be consulting on introducing a distance-based road user charge (RUC) called, confusingly (and of course deliberately) the electric Vehicle Excise Duty (eVED).

This is distinct from Vehicle Excise Duty (VED) which is essentially equivalent to annual vehicle registration fees seen in most countries worldwide.  Both electric vehicles (EVs) and plug in hybrid electric vehicles (PHEVs) have been subject to VED in the UK since April 2025 after many years of exemptions, although the rates for the initial registration of such vehicles are lower than for petrol and diesel vehicles (£10 (US$13.23) in the first year for EV/PHEVs, £110 to £5490 (US$146 - US$7262) depending on the CO2 emissions rating).  In the second and subsequent years, most cars are on the same rate for VED.  The concessionary rate for VED for EV/PHEVs is currently due to expire in 2030. 

VED raises £8.4b (US$11.11b) per annum, and is hypothecated to the National Roads Fund, which funds National Highways - the Crown company responsible for England's strategic road network (national highways!) and also includes some funding for local roads.

However, eVED is not like the annual registration fee, in that it is not a fixed tax. The only parallel is that it will be collected at the same time as the registration fee (which is an echo of Hawaii's HiRUC programme which collects HiRUC at the same time as the annual vehicle registration). 

eVED is a distance-based RUC, presumably called so because in the UK, the term RUC was used to legally describe any congestion charging type scheme.  

(The one commonality around road pricing/RUC is that it appears to be absolutely impossible for many jurisdictions to use the same terminology to name the same concept)

eVED is proposed to apply from April 2028 and the consultation document on the proposal is here.

In one sense this is a huge leap forward. The UK has spent over 20 years with on and off debates about some form of national distance based road charging, and has mostly been focused on highly sophisticated distance, time and location based pricing (at once time known as TDP (time distance place) pricing). However, as much as academics, bureaucrats and technocrats have advanced how and why this should be done, they have proven completely incapable of developing a policy package and communicating such a package to the public, to make it acceptable.

eVED, by only charging EVs and PHEVs, and only being based on distance is a much simpler proposition, and might just happen.

Why?

Fuel tax revenue loss, pure and simple. Also, as EVs pay nothing to use the roads, they are likely to generate more demand for distance travelled than other vehicles, contributing more to congestion. 

Fuel tax raised £24.4b (US$32.3b) per annum for the UK Treasury in 2024. Noting none of it is hypothecated, unlike in the US. The average petrol or diesel car owner pays around £0.06 per mile (US$0.079 per mile or US$0.127 per km) per vehicle.  This equals about £480 (US$635) per year to use the roads in the UK.  Of course this is just an average, but is an indication of a point to compare to EVs and PHEVs.

Fuel duty revenue is forecast to halve by the mid 2030s.  Curiously the discussion paper depicts this as a loss of funding for 265 million General Practice doctor appointments (as the UK charges nothing for such appointments, for all residents, regardless of income, under its National Health Service), because fuel duty is not linked to any spending.  This is seen as perhaps more politically significant than funding for road maintenance (which is far exceeded by the income from fuel duty).

In short, eVED is to try to make up for this revenue loss for cars.

EV vehicle sales

Treasury reports that around a quarter of new car sales in October 2024 were EVs. The UK Government's policy is to ban sales of conventional ICE cars in 2030 with a further ban on sales of hybrid and PHEVs by 2035 for light vehicles altogether. 

How much will it be?

For pure EVs, £0.03 per mile (US$0.04 per mile or US$0.064 per km). Around half the average paid in fuel duty by petrol or diesel cars. Of course at that rate it only recovers half of what fuel duty currently does, which is in part a way to continue encouraging use of EVs relative to petrol and diesel cars.  It will be increased according to inflation annually. 

PHEVs will be charged at half that rate, at £0.015 per mile (US$0.02 per mile or US$0.032 per km). This is based on nothing more than a political call on what the rate should be, not any reflection of relative payment of fuel duty compared to pure electric use. 

How will it work?

eVED will be an addition to VED, and be paid annually.  Vehicle owners will be asked to estimate their annual mileage and pay either that whole amount upfront or in instalments throughout the year.  The actual mileage will be checked with the annual safety inspection (which only occurs when a car becomes three years old).  For the first two years of a car's life, the odometer will apparently need to be checked for the annual registration. This will be another inspection, which it is hoped can simply be combined with vehicle annual servicing (which most owners of new vehicles undertake regardless). 

Systems will need to be put in place so authorised MOT (safety inspection) garages can collect and pass on mileage data to the Driver and Vehicles Licensing Authority (DVLA). 

At the mileage inspection, if the estimate of the year's mileage is too high, then there will be a credit for the mileage for the following year. If it was too low, then there will be more to pay either in a lump sum or in higher instalments for the year ahead. 

When sold, any prepaid mileage will stay with the vehicle, and be visible to any new owners (so it can be factored into the price).

What about foreign vehicles in the UK?

They won't be subject to eVED, until they become subject to VED (which is when they remain in the UK for at least six months).  This will be quite an issue in Northern Ireland with its open border to the Irish Republic.

What about mileage driven outside the UK?

Tough. All mileage counts. The view is that there is no refund for fuel duty used in vehicles driven overseas, so the same applies here. Of course nobody pays fuel duty for an entire year, and few even pay as infrequently as monthly, so it isn't quite the same.

Is it just about odometers?

Yes, for now, but the consultation seeks advice on how OEM (Original Equipment Manufacturer) telematics might be used voluntarily to automatically report mileage.  The consultation is silent on whether it might be used to exempt mileage driven overseas.  

The consultation notes that 2.3% of vehicles have had their odometers tampered with to lower their readings. It is unclear whether this figure is applicable to EVs and PHEVs as much as other vehicles.

What's the money to be used for?

The consultation doesn't say, although there are references to contributing towards the "wear and tear on the roads" caused by cars (which is negligible). It seems likely to be treated as general Crown revenue, and not be hypothecated. This won't help public acceptability or indicate any actual link to what vehicles should pay based on a fair allocation of infrastructure costs to those vehicles (but that has never been the case for fuel duty either). 

What's next?

The scheme is not meant to start until April 2028, so the consultation responses will be the first check on the public mood for the proposal. There has already been some backlash, but that may be as much about the unpopularity of some general Budget measures around income tax as this measure. 

There are plenty of questions beyond those in the consultation document. The scalability of this proposal beyond EVs and PHEVs being one of them, especially to heavy vehicles.  I'll have to more to write about it in due course.

New Zealand's Parliament passes legislation to enable congestion pricing - unanimously (but the details will come later)

In a possibly unprecedented step, the New Zealand Parliament has voted - unanimously - to pass legislation allowing for "Time of Use road pricing" to be enabled, based on proposals from local road controlling authorities in partnership with the NZ Transport Agency (NZTA) (the central government transport funding and regulatory agency, which is also the State Highway manager).  

The Bill was introduced into Parliament by the three-party centre-right coalition government, and at the end was backed by the three leftwing Opposition parties as well.  I believe this is the first time anywhere in the world that congestion pricing has received unanimous political support at a national level.

According to the press release from Transport Minister, the Hon. Chris Bishop:

Sitting in traffic wastes time, costs money, and drags down productivity,” 

“Travel times in our major cities are up to 30 per cent longer than in comparable Australian cities, with Auckland congestion alone estimated to cost up to $2.6 billion by next year.

“Time-of-use charging is a common-sense tool that encourages people to travel at off-peak times or by other modes. It’s about keeping our cities moving - whether you’re a parent on the school run, a tradie heading to a job, or a truckie delivering exports to port.

“Time of use charging has been talked about in New Zealand for years and now we’re getting on with it. I am really pleased that the legislation to allow the establishment of time-of-use charging schemes passed Parliament unanimously. After years of discussion, it is great to see that all of Parliament is up for reducing congestion and improving productivity.

Ironically, there is next to no political appetite for such a policy in Australia in the near future, in any State or Territory.

Of course the legislation itself does not actually implement road pricing, but it does provide a framework for time of use pricing proposals to be generated, as a local-central government partnership, for approval by the Minister.  The details as to what it will mean, in practice, will only come once the Minister of Transport has approved a road pricing scheme, following a proposal submitted by local and central government authorities.

Objective

Unlike some congestion charging schemes implemented elsewhere, the primary purpose of any proposals in New Zealand must be to relieve congestion, not raise revenue (although it is acknowledged that revenue will be generated). It is not designed to reduce emissions, but it is acknowledged that this is likely to be a benefit from it.  It is fundamentally not intended to punish driving, but to reduce driving on specific roads at specific times so that traffic can flow more freely.  It more closely resembles the objectives of the Singapore Electronic Road Pricing policy, than say New York or London.

This is not surprising, as New Zealand is one of the most car-oriented countries in the world.  Auckland, which has 1.7 million people and has made the greatest progress in developing options for road pricing, may be the first to implement it. However, Auckland has highly dispersed travel patterns with around 80% of trips in Auckland undertaken by car (either as driver or passengers), with 18% by walking or cycling (and the remainder by public transport).  

Timing

The legislation does not come into force for a year after Royal assent, and subsequent to that, the Minister can receive proposals for approval, amendment or refusal. Given the next New Zealand General Election must happen before the end of 2026, it seems unlikely that the Minister will receive a proposal in advance of that. 

What's next?

Auckland Transport and subsequent to that Auckland Council are expected to make decisions on what sort of Time of Use road pricing scheme it wants to implement, with NZTA, and a proposal will need to be developed for acceptance by NZTA and then submitted to the Minister.  Before that happens, there will need to be public consultation on the proposal, and at that point the pressure will be highest on local politicians as to whether they want to advance any proposal for implementation.

Other cities can submit their own proposals too. Wellington, Christchurch, Queenstown and Tauranga have all been mooted in recent years for congestion pricing on some scale, so it will be interesting to see which, if any, look to advance work on concepts for pricing in the coming year. Although much smaller cities and towns than Auckland, all have some congestion at peak times which can be severe for their size, and could benefit from road pricing. 

Of course nothing is guaranteed.

The UK has had legislation enabling congestion charging by local authorities for around 24 years, and only Durham and Nottingham (the latter being a workplace parking levy) have implemented schemes under that legislation (London happened under specific legislation setting up Transport for London).  New Zealand will not be quite the same, as the UK has generally enabling legislation (not requiring central government support), whereas New Zealand will see proposals go to the Minister for approval and will need to be a central-local government partnership. However, I would wager that it is more likely New Zealand will have a congestion pricing system operating sooner than any other UK cities will implement it.

New Zealand, appears on the face of it, to have a rather unique set of political willingness to enable congestion pricing, which is unseen elsewhere, but the reality of what any proposal will actually mean for motorists will come later.

Let's hope whatever proposals advance, that they can bring enough political and public acceptability to enable them to be implemented.

The Bill (which won't be law until Royal Assent) is available here.

(meanwhile it would be nice if the NZ Ministry of Transport updated its website)

Switzerland consulting on RUC for electric vehicles

Switzerland has the longest record of any European country with distance based road user charging, being the first to introduce it (for heavy vehicles (GVW over 3.5 tonnes)) in 2001 with its LSVA system.  The LSVA charges virtually all heavy vehicles by distance and weight class across all public roads in Switzerland (and Liechtenstein), although the first generation system used the tachograph as the primary measurement of distance, it used one of the first GPS On Board Units (OBUs) to support that measurement, including detecting where vehicles entered and exited the country.  It is worth noting the LSVA is mandatory not only for Swiss registered heavy vehicles, but visiting heavy vehicles (with a manual odometer reading on entry and exit at the border for those not equipped with GPS approved OBUs, and a lump sum option for some classes of heavy vehicles).

Light vehicles were not subject to such a charge, but the vignette for use of the the motorway network applies to them (CHF40 per annum (~US$50), along with fuel taxes and registration fees as in most jurisdictions. This looks likely to change in the coming years for the same reasons as many other jurisdictions have been considering road user charges (RUC) - the inability of fuel tax as a way of charging for road use by electric vehicles (EVs).

Switzerland's Federal Council announced at the end of September that it is consulting on options to tax EVs, with the intention that it commence in 2030.

If successful, it is possible Switzerland could be the first mainland European country to introduce a light vehicle distance based RUC (given Iceland already has one).

Background

The press release from the Federal Council states that the Federal road infrastructure is 100% user pays, with the "mineral oil tax" being the main source of revenue for it.  It pays into the National Road and Agglomeration Transport Fund and the Special Financing for Road Transport Fund with half of the fuel tax revenue also being general revenue to the Federal Treasury. 

Tax on petrol is at CHF 0.7312 per litre (US$0.91)

Tax on diesel is at CHF 0.7587 per litre (US$0.94)

Any new tax on EVs would be expected to go to similar funds as the taxes on fuel. To implement such charges would require Constitutional Changes.

Options

The two options being considered are:

- Distance based RUC also based on vehicle weight (estimated to average at CHF 0.054 per km (US$0.067)

- Energy based tax on electricity used to charge EVs (estimated to average at CHF 0.228/kwh (US$0.028)

The proposed energy tax would apply to both public and private vehicle charging (which would raise questions about implementing and enforcing such a fee on vehicle charging at home).

Consultation

Documents on the consultation are available here (in German) and here (in French) and here (in Italian)

Consultation concludes on 9 January 2026.

Thoughts

I'm not a fan of levying the electricity used in EVs because it is fraught with the cost of implementing separate metering at homes primarily to recover a tax, and there remain issues around enforcement. It is also a highly inferior way of pricing road use, through a proxy tax, rather than one actually based around usage. Switzerland's long and successful operation of its LSVA system for heavy vehicles (which is not fuel specific) indicates it is possible to extend this to all vehicles, in an appropriate form.

Key to any distance charge when vehicles can cross borders is to provide an option to have distance measured by location, so this ought to be included but be optional.  How this is to be accomplished is worth exploring.

Likewise, only having such a fee for EVs, and not considering plug-in hybrids or battery electric hybrids would be a mistake, as those vehicles pay much less fuel tax, and it would be seem appropriate to ensure they are charged appropriately for using the roads. Ultimately it could apply to all vehicles in due course, but this is

UK likely to introduce road user charging for EVs and hybrids, and it doesn't resemble National Road Pricing

The Daily Telegraph, Financial Times and multiple other UK newspapers are reporting that the UK's Chancellor of the Exchequer, Rachel Reeves, will announce on 26 November 2025 that she is implementing a distance based road user charge (RUC) to apply to light electric vehicles (EVs), plug in hybrid vehicles (PHEVs) and battery electric hybrid vehicles (BEHVs) from 2028.

EVs will be charged £0.03 per mile (US$0.024 per kilometre), with "lower rates" for PHEVs and BEHVs, reflecting their use of taxed fuel.  It is noted that current estimates are that the average petrol car pays around £0.06 per mile (US$0.048 per kilometre) based on fuel consumption. So the proposed EV rate aims to charge half the price of petrol cars, to help reflect the lower environmental impact and retain an advantage for such vehicles.

Fuel duty (officially called hydrocarbon oil duty) is at £0.5295 per litre (US$0.69 per litre). This is well in excess of fuel taxation in North America and Australasia, but not out of step with some countries in Europe.

Why?

25.4% of new light vehicle sales in the UK in October 2025 were EVs, 13.3% are BEHVs and 12.1% are PHEVs.  So there is clearly an issue emerging of declining fuel duty revenue. 

Estimated revenue from the new charge will be £1.8b (US$2.35b) per annum by 2031. This compares to around £24.8 billion in 2024 from hydrocarbon oil duty.  In 2025/2026 alone it is estimated that around £300m (US$392m) is lost in hydrocarbon oil duty revenue from the growth in use of EV and hybrid vehicles. One estimate is that by 2029 that annual loss of revenue will be at £3.5b (US$4.6b) per annum, although later estimates are predicated on bans on sales of petrol and diesel light vehicles.

Note that hydrocarbon oil duty is not hypothecated for road or any form of spending. It is simply general tax revenue for Treasury. 

Secondary to revenue is fairness. Without some form of road user charge, those who cannot afford EVs or hybrid vehicles are paying more to use the roads and contribute to government spending than those who do not. 

How?

Articles so far indicate that the Driver and Vehicle Licensing Agency (DVLA), a branch of the Department for Transport (DfT) will be tasked with collecting the revenue, as it already collects the UK's annual vehicle registration fee (known as Vehicle Excise Duty - VED).  DVLA checks compliance through Automatic Number Plate Recognition (ANPR) cameras matching vehicles to its database as to who has paid VED. The same could be done with RUC. 

However, the details around implementation leave many unanswered questions. It is suggested vehicle owners will estimate future mileage driven and prepay for that distance, with credit given if overpaid. This suggests some form of independent recording of odometers, likely at annual vehicle safety ("MOT") checks, although these are not required for vehicles in the first three years of registration.  Options include sending photos of odometer readings or the use of telematics technology to report distance, but none of this is clear as of yet.

Reaction?

The Conservative opposition is opposing it, even though it is likely that it would have to do something similar, but given the Labour Government has been doing badly in opinion polls for many months, it is clear this policy is likely to generate plenty of heat from political parties keen to weaken the Government. However, the next UK election is not due until August 2029 at the latest, so theoretically this should not be such a major consideration for now. 

Hasn't the UK been here before?

Arguably yes. From the ill-fated Lorry Road User Charging project (which aimed to charge trucks by distance and vehicle class) replaced by the National Road Pricing project in 2005 which was shut down in 2007 due to public opposition. The differences between that project and this proposed charge are fairly stark though.

National Road Pricing aimed to reduce congestion by requiring all vehicles in the UK, regardless of fuel type, to be equipped with GNSS enabled on-board units, to measure distance varying by time of day and location, so that full network road pricing could be implemented. Although there were indications that some existing motoring taxes would be reduced, such as VED and hydrocarbon oil duty, there was vigorous public opposition. That opposition focused on how much people might pay, disbelief that existing taxes would be reduced by a reasonable amount, lack of belief that it would improve conditions for drivers and belief that money collected would be "wasted".  Around 2 million signatures were added to an online petition to 10 Downing Street to stop the project (and it was subsequently shelved).

A more simple distance and vehicle class based RUC would resemble that which already exists in Iceland, New Zealand and four US states.  Politically the question is how it might be sold to the public, as it is unlikely to matter too much that it is about raising revenue, but it may be to present it as ensuring drivers of EVs, PHEVs and BHEVs pay their "fair share" of the costs of maintaining the road network. 

Issues?

There are plenty. From how distance measurement will be verified and reported, especially in the first three years of a vehicle's life, to whether payments will be annual or can be spread throughout the year.  

Some other obvious questions:

• How will distance travelled outside the UK be treated (Northern Ireland may present particular challenges)?
• How will distance travelled by vehicles visiting the UK be treated?
• Will this only apply to light EVs and hybrids, and if so, what about heavy vehicles?
• Will motorists be able to pay in increments rather than annually?
• Will there be options for fleet operators to report distance more efficiently than is needed for private individuals?

Another question will be whether the revenue will be hypothecated to contribute to spending on road maintenance and renewal, which would give a long-term funding stream to support long-term commitments to the renewal of roads throughout the UK.  The UK Treasury is likely to oppose this, as it is philosophically opposed to any measures that reduce the flexibility of use of tax revenue, but the Department for Transport may take a different view, seeing the RUC as a user charge closer to a utility fee, so that it reflects a payment for the use of infrastructure (whereas hydrocarbon oil duty is simply a tax on fuel). 

What's next?

Details are to come. Key to this will be how these and other design and policy questions are answered, and how it is sold to the public. Is it just a new charge to cover off those types of vehicles, or is there an expectation that it may be expanded to other vehicles over time? (the latter would seem to be very risky politically, given the ineptness of politicians and the civil service in getting public acceptance for anything like this in the past). 

Maybe the big question is whether it is a first stage towards national road pricing? (it could be) Or is that going to be ruled out for now? Noting that this is going to apply across the UK, so what happens to the revenue in Wales, Scotland and Northern Ireland will be of interest to EV and hybrid vehicle owners in those countries. 

Oregon inches forward with RUC for EVs from 2031 mandated (sort of)

The Oregon Senate has finally passed a transportation funding bill that at last extends the scope of Oregon’s light vehicle road usage charging (RUC) system around 10 years after MYOREGO was launched in 2015.

From 2031, electric vehicle owners in Oregon will be required to be on RUC (it is currently an “opt-in” system) or pay an annual fee of US$340 (which means it isn’t a requirement). RUC for light EVs will be charged at US$0.02/mile (US$0.032/km).

The bill also includes:

• Increasing state gas tax from US$0.40 to US$0.46 per gallon (US$0.106 to   US$0.122 per litre

• Increasing annual registration fees by between 66 and 90% (e.g. from US$43 to US$85 for cars)

• Increasing title fees (change of ownership tax) for car from US$77 to US$216

• Increasing registration surcharges for EVs and highly fuel efficient vehicles (intended to offset their lower gas tax consumption) from US$115 to US$145 per annum for EVs, and US$35 to US$65 per annum for cars with a higher than 40+ mpg rating (essentially hybrids).

• Doubles payroll tax used to fund public transport subsidies, for one year, from 0.1% to 0.2%.

It’s worth remembering Oregon has long has a weight-mileage tax – RUC for heavy vehicles, which also exempts those vehicles paying it from paying tax on diesel. This exemption is implemented by providing fuel retail outlets with proof of enrolment in the weight mileage tax programme. However, this is entirely separate from the RUC system for light vehicles.

Oregon was a pioneer for RUC in the US, running the first major studies and pilots from 2001 till 2013 and implementing the first revenue generating system on 1 July 2015. MyOReGO has been capped at 5,000 participants, but has been languishing in recent years with only 800 enrolled this year.  In the meantime, Utah, Virginia and Hawaii have overtaken Oregon in the scale of their light vehicle RUC programmes in the US.

MyOReGO charges participants US$0.019 per mile instead of the registration surcharge, but has not been extensively promoted for some time. Now it will come into its own, but Oregon Department of Transportation will need to review the current system as it moves to mandate it for EVs. Fo

Around 2% of light vehicles in Oregon are EVs.

For Oregon, this transportation bill is one of despration as it struggles to fund essential road maintenance and operations such as snow removal and graffiti cleanup along highways. Half of the revenue will go to the state budget with 30% to countries and 20% to cities.

Opposition to RUC comes from the “Move Oregon Forward” group which advocates for “climate and equity” claiming it “unfairly penalises” EV drivers, although it is unclear quite the basis for this.

The Bill is seen by some as being a temporary fix, it is clearly not going to be enough, but is a start. 

All in all, this is a positive move, although it is going to take some years before it is implemented and appears very unambitious compared to the likes of Hawaii which is mandating RUC for EVs from 2028. Given the many many times there have been attempts to advance RUC in Oregon over the past decade, it is clearly a significant step. Let's hope there is no further backsliding.

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).