NSW advances toll reform

Tolls have been a major political issue in New South Wales (NSW) for some years, or rather (I should say), Sydney.

It is sometimes claimed (including by the NSW Government) that Sydney has the greatest number of toll roads of any city in the world. That's not true. While it has 156km of toll road, Tokyo easily has over double that as does Dallas/Fort Worth (which has about the same length of full toll roads as Sydney, but the same again in tolled lanes/HOT lanes on otherwise untolled roads). Santiago, Chile has over 200km of tolled roads, as does Osaka, Japan.

Of course Sydney does have the longest length of toll roads of any city in Australia. Brisbane has around 90km and Melbourne 78km (although North East Link will add another 10km), so Sydneysiders may feel it is unfair, but Sydney has a lot of toll roads because its geography

Sydney's toll road network is impressive, but toll rates are un-coordinated. The map below depicts the tolled road segments only.

Sydney toll road network

The Independent Toll Review for the NSW Government, released two years ago and led by Professor Allan Fels (former Chairman of the ACCC) as Independent Chair with Dr David Cousins as Deputy Chair, proved controversial, especially with toll road concessionaires.

I wrote about it in three parts: Background, Findings and Recommendations. in 2024. 

It is telling that it has taken so long for the NSW Government to determine what was feasible—not merely politically and legally, but commercially—given that most of the state’s toll roads are locked into PPP concessions. This is a legacy of successive Coalition and Labor governments (it is simply not true that the results are just because of the Coalition's "privatisation" policies, when Labor embarked on multiple toll road concessions itself), and simply reflects the rather ad-hoc development of Sydney’s tolled motorway network over the past thirty years. Those concessions have locked in toll rates and, in particular, complex and expensive-to-renegotiate price escalations.

Notwithstanding these constraints, the NSW Government retains some flexibility. It owns two key toll roads (the Sydney Harbour crossings) and can negotiate with concessionaires. Some concessions are coming to their end.

It is therefore a relief that decisions on toll reform have finally been made. While some may argue that the measures only scratch the surface, they represent a step forward.Note that Transurban, as the sole or part owner of virtually all the concessions in Sydney, is also publicising its role in the negotiations. So what is going to occur?

There are 12 toll roads in Sydney (if you count the Military Rd E-Ramps as being associated with the Lane Cove Tunnel), so the impacts vary across the roads.

The official NSW government information on the reforms is here.

Transurban has also published its own press release about the reforms. Transurban says it has been working constructively to enable tolling reform and its own website is replete with useful information. Of course Transurban is, legally and commercially, focused on protecting and enhancing its own profitability, but that also requires ongoing social licence and political acceptability. It's a careful balance for a business that perhaps thought itself somewhat under siege during the Independent Toll Review and understandably so, particularly given its long term interest in protecting its position as lead toll concessionaire and operator for existing (and future) toll roads.

I haven't sought to detail all of the changes, just the main ones.

Tolls reduced or toll increased reduced

Four roads see tolls reduced for most users:

• Lane Cove Tunnel (10%)
• M2 (longer trips only) (10%)
• M7 (10% lowering of the distance cap)
• Cross City Tunnel (20% reduction when Western Harbour Tunnel opens).

The Sydney Harbour Bridge and Tunnel toll increases, which were to be 4% are now going to be at 3.25%.

Change vehicle class multipliers

Heavy vehicle multipliers on Sydney toll roads have varied from 2x to 3.47x the standard light vehicle rate. From 1 July 2027, all (except the Lane Cove Tunnel) will be standardised at 3.15x.  This both simplifies tolls for trucks, but also ensures demand by heavy vehicles is more evenly spread between toll roads and untolled roads.  For example, the Eastern Distributor is cheaper than the M7, effectively encouraging more truck traffic through that central corridor, compared to the M7/M2 corridor.

The other adjustment is to implement a 0.5x multiplier for motorcycles. This is a reduction for all roads, recognising that motorcycles occupy much less road space (and should encourage more use by motorcycle owners).

Two way tolling

This had already been agreed for the Sydney Harbour Bridge and Tunnel, so that tolling will be northbound as well as southbound, which will better regulate demand on both crossings. especially with the imminent opening of the Western Harbour Tunnel. 

Two way tolling will also be implemented on the Eastern Distributor, once the Western Harbour Tunnel is opened. With the toll in each direction being 53% of the current one way (northbound) rate, this should also better regulate the flow of traffic in both directions on this corridor, and more importantly across the harbour.

Other measures

The press release indicates that toll concessionaires will pay A$75m over five years to help pay for the weekly toll cap, which is a recognition that it will increase demand on their roads.

The remaining two-lane each way (four lane) sections of the M7 and M2 motorways (Richmond Road to Old Windsor Road) will be widened, at taxpayer expense without a toll increase or extension of the private concessions.

The weekly toll cap will continue. It means that a NSW resident with a personal toll account (such as Linkt or E-Toll) and a privately registered vehicle is subject to a cap of A$50 per week in tolls.  It works through lodging a claim for the excess quarterly through Service NSW.

The M5 Cashback programme will also continue (although you cannot use both the cap and the cashback on the same road. M5 Cashback effectively means M5 toll road users, registered with private vehicles in NSW, can claim back the toll quarterly. 

Conclusions

It was hard to negotiate any changes with concessionaires, but from an economically rational point of view, several of the announced measures are a step forward.

Standardising vehicle class multipliers makes a lot of sense. For toll roads the multipliers should mostly reflect road space occupancy (and the capital of the capacity built to take the vehicles).  

Two way tolling is more rational than one-way, particularly when there are alternative routes that see some southbound traffic use the Gladesville and Iron Cove Bridges, then the Anzac Bridge, to avoid tolls. Moving to two way tolls should rebalance those flows. 

Everything else appears to be a subsidy or a cap on tolls charged. There is a point to capping or discounting heavy use of toll roads, as frequent users are undoubtedly over contributing towards the costs of that infrastructure, but blanket caps on private users and the M5 cashback subsidise demand.  There might be a point to capping off-peak use, but there is nothing here about charges varying by time of day.

Sydney Harbour Crossings have peak, shoulder and off-peak charges, but that's because they are not subject to a concession. Wider application of time of day varying toll charges would obviously have an impact on congestion and spread demand, but the chances of toll concessionaires agreeing to this with countervailing reductions in tolls over longer off peak periods appear to be next to zero. 

So a step forward? Yes.

Does it address all of the fundamental limitations and issues around tolling in Sydney? No. That will have to wait another day.

It's my view that the public image of tolls in Sydney is by far the single biggest barrier to any form of congestion pricing in the city. Quite simply, few believe that pricing roads leads them to flow better and be less congested, or that it isn't primarily about money.  Most cities that have introduced congestion pricing did not had tolls on any scale previously (Singapore, London, Stockholm, Gothenburg). 

The best hope for Sydney demonstrating congestion pricing in some way, in the medium term, is the state applying higher peak charges on the tolled routes it owns in exchange for cheaper off-peak charges (to encourage use of spare capacity). Perhaps once the Western Harbour Tunnel opens, and all harbour crossings are tolled two-way (once more), there may be more will to do this.

UK announces further details of its electric vehicle road user charging proposal (eVED)

I wrote in December 2025 about the proposals from the UK Government for what it is called eVED or Electric Vehicle Excise Duty.  Elsewhere, this would be known as a distance-based road user (or road usage) charge, and is intended to apply to EVs, PHEVs and hydrogen fuel-cell vehicles that are light passenger vehicles.

The UK is following Iceland and New Zealand, which are the first two countries to mandate distance-based road user charging for EVs and PHEVs. It is also following in the US, Oregon, Utah, Virginia, Hawaii and Vermont all of which have or are introducing opt-in distance based charges (with the option of an annual fixed fee) for similar vehicles. 

The significance of the UK is it will, when implemented, be the largest light vehicle road user charging system in the world (based on numbers of vehicles it applies to). 

There are around 2.8 million vehicles today in the UK that it will apply to, which is larger than the number light vehicles that are subject to RUC in New Zealand (currently the largest - which is around 1.2 million light vehicles). That number will be exceeded when New Zealand shifts all remaining petrol powered light vehicles to RUC (which will mean around 4.3m light vehicles on RUC).  

What is VED?

In order to avoid confusion in terminology, what is meant by Vehicle Excise Duty in the UK is broadly equivalent to annual vehicle registration or licensing fees in most other jurisdictions. This are broadly fixed fees for a duration (one year or smaller increments), based on a vehicle classification which may be by size, type of vehicle, gross maximum weight, engine size, fuel type or emissions class, or some combination of those.

The eVED proposal is for a fee based on distance travelled to apply to BEVs and PHEVs.

What's happened now?

The UK Government has now published its response (PDF) to consultation on the proposal.

The details of the proposal have been updated on the UK Government website here.

In short:

• On 1 April 2028, light BEVs, PHEVs and hydrogen-fuel cell cars will be subject to eVED. It only applies to "light passenger vehicles" so not light commercial vehicles.
• The charge will be £0.03/mile (US$0.025/km) for BEVs and hydrogen-fuel cell vehicles and £0.015/mile (US$0.0126) for PHEVs. 
• Charges will be increased in 2029 and 2030 in line with the Consumer Price Index.
• Drivers will be required to provide an odometer reading when they re-register their car for VED from that date, and to estimate mileage for the YEAR ahead.
• Drivers can choose to pay for the entire estimate upfront in advance, or in instalments spread through the year.  Reconciliation of the correct amount will happen at annual VED time.
• It is expected to generate £1.1b (US$1.48b) in revenue in the first full year, increasing to $1.435b the subsequent year and £1.865b in the year after that.
• The effect on EV sales is expected to be a 2% reduction over a five year period.

So the fee will not apply to any other BEVs or PHEVs (i.e. light commercial or heavy vehicles)

Several other important elements include:

• Net revenues will be treated as general tax revenue. It will not be hypothecated for road spending or transport spending.  This reflects fuel duty, but does not reflect practice in any other jurisdiction, which generally sees it hypothecated for road spending or to support further vehicle electrification.
• No provision has been made to require that there be a location-specific option for measuring distance available for vehicle owners who want it. This means that such vehicles located in Northern Ireland which cross the Irish border, will be subject to the fee for any distance driven in the Republic of Ireland. Likewise, driving such a vehicle outside the UK will see the fee charged at the same rate. Officials may say it is the same case with fuel duty, except that fuel duty isn't paid infinitely on travel outside the UK. At some point the vehicle will need refueled, and would be subject to fuel duty in the country of purchase.  If the Republic of Ireland or say France introduced a similar fee, imposed on visiting vehicles, then it would mean UK registered vehicles are double taxed.
• The fee only applies to UK registered vehicles, so visiting BEVs. PHEVs and hydrogen fuel cell cars will pay nothing.
• Verification of odometer readings only occurs when safety inspections are undertaken ("MoTs") , which only needs to happen after a vehicle is three years old. This raises the real risk of vehicle owners facing a very high initial EVED bill if their estimate of miles for the previous three years has been low. This is particularly the case if it has changed ownership, as the incentive will be for the owner for the first two and a half or so years to estimate a very low mileage and pay (and lie about mileage when renewing VED), and to sell the car, with the subsequent owner receiving the first MoT and the verified odometer reading being much higher.  This might be resolved if change of ownership includes records of reported mileage to be compared to actual mileage on sale.

The proposal continues to upset the EV retail lobby which sees it as risking EV sales overall, but it is a fairly simple plan, and it does only partially recover revenue that would otherwise have been collected from fuel duty if the cars were petrol or diesel powered.

Nevertheless, assuming it proceeds it means the UK will be introducing a road user charge from July 2028 which is distance based, largely as a partial revenue replacement for fuel duty.  This will follow Vermont in January 2027 and New South Wales in July 2027.

We will await to see if the new British Prime Minister, and Chancellor of the Exchequer will see these plans change, once again. However, given the experience of multiple other jurisdictions, it appears the UK has gone for an excessively simplistic approach, when it should have been more bold. 

What could the UK do instead?

1. Allow odometer self-reporting via app, to spread out payments:  The average car in the UK is driven around 7,200 miles per annum.  That means £216 a year if charged 3p a mile. It should be possible for those who want to spread that out up to four times a year to do so, if they submit odometer readings (either through an app or to an independent third party).  Iceland bills motorists (in fact all vehicle owners for all vehicles) monthly, with an estimate which can be corrected through submission of an actual reading.  This added flexibility will better suit some users, and avoid the pressure of a higher annual fee.
2. Allow the market to enable third parties to provide distance measurement and account management services, including the option to exclude distance off public roads including outside the UK: Complaints about driving to Ireland or France are valid, so the option to avoid paying for distance in other countries should be available, although not government led. Likewise, some people in rural areas may want to avoid paying for distance travelled on private properties. Some Treasury officials will insist this is fair because fuel duty is consumed for such trips, but if the UK is not interested in moving more towards user pays in road charging then it is missing out on an opportunity for more efficient and fairer pricing
3. Hypothecate the revenue and subject increases to regulatory review: Treating it like just another tax prevents there being more flexible charges and pricing in future, and also undermines its potential acceptability. If net revenues were used to help pay for road maintenance, then the rates they are set at can be based on the cost of providing that infrastructure allocated proportionately to those vehicles. This becomes the embryo of a national road user charging system for all vehicles that recovers infrastructure costs much more fairly and efficiently than the status quo. Not doing this leave it as just another tax, and provides no link between what is paid and what service is delivered.

It is easy to see why this proposal might be scrapped, except that the government will urgently want over £1b in revenue per annum, and will also want to start sending the message that driving is not "free" if you have an EV.  Surely it would not be difficult to enable the private sector to provide solutions to make it easier both for fleet operators, and for vehicle keepers whose vehicles leave the UK regularly to not have to be subject to paying for distance travelled outside its jurisdiction? (even if such solutions are not necessarily available to all vehicles on day one).

Vermont will be the next US state to implement RUC

Following in the footsteps of Oregon, Utah, Virginia and Hawai'i, Vermont has passed legislation implementing a distance based road user charge (PDF) (called a Mileage Based User Fee - MBUF) from 1 January 2027.  This of course makes Vermont the sixth US state to introduce a road usage charge for light electric vehicles.

It will apply to battery-electric vehicles registered in Vermont (so not vehicles visiting from other states) charging US$0.014 per mile (US$0.0087/km). The maximum payable within a 12 month period is US$178 which is around 12714 miles (a relatively high cap).  

All US states that have implemented RUC for light vehicles have implemented a cap, unlike jurisdictions in Europe and New Zealand (and unlike fuel tax!).

Vermont MBUF will be measured using odometer readings, initially. With options to pay:

• Annually, following one odometer reading (e.g., at safety inspections); 
• On a regular basis (at an interval determined by the Commissioner of Motor Vehicles) known as "pay as you go"; or
• Flat fee at the level of the cap (US$178).

Part of the programme includes a transition plan to expand beyond battery electric vehicles.

It will be expanded to PHEVs from 1 January 2029 with work to be undertaken on "additional mileage reporting options" specifically referring to location based options so that distance travelled outside Vermont could be excluded.  Indeed, the legislation indicates that there should be at least one option for motorists to distinguish between distance travelled in state and out of state when it is extended to PHEVs. 

Inclusion of PHEVs is also dependent on developing a fuel tax credit system to refund fuel taxes, based on the vehicle's fuel economy. It is unclear if this simply allows for estimations of fuel consumption or actual fuel consumption.

Furthermore, the transition plan will also investigate expanding coverage to medium and heavy duty EVs and PHEVs, although no date has been set for such a transition or decision made to actually expand beyond light EVs and PHEVs.

Earlier discussion in Vermont's legislature considered MBUF applying to all vehicles, so it is clear that there is a path by which EVs and then PHEVs are paying by distance, with future application to heavier vehicles of the same motive power and then applied to other vehicles.

What is notable for Vermont is:

• No RUC pilot was run in Vermont, rather this has followed a feasibility study and the operation of an advisory committee.
• Explicit inclusion of a location enabled option for the next phase, indicating the importance of addressing vehicle owners not being charged for out-of-state distance.

There will be clearly be more forthcoming about this in future months, as the rollout date is short, but at least at first it will be a relatively simple low-cost system.

Challenges will be:

• Not charging out-of-state vehicles to use the roads (such vehicles pay fuel tax when filling in Vermont now, but won't be included, largely because of political reluctance and legal complexities in identifying and enforcing such systems for out-of-state light vehicles (note than Oregon's Weight-Mile Tax applies to trucks regardless of the state where they are registered, for driving on public roads in Oregon.
• Selecting a suitable location based system for PHEVs (which could presumably also apply to EVs).
• Obtaining public acceptability for the final approach to credit fuel taxes to PHEV owners (noting Oregon has been doing this for some time).

Does road user charging deter electric vehicle sales?

 

On 20 May 2026 I had the privilege of presenting a seminar at the University of Sydney, Institute of Transport and Logistics Studies,  on the topic of "Road user Charging in Australia: Finally, after 20 years?".

One small piece of research I pulled together when preparing the seminar was to look at reported quarterly sales data for EVs (pure EVs, not hybrids) as a proportion of all new light vehicle sales, for New Zealand, Australia and Iceland. 

The reason being fairly simple. It is to identify any discernible impact on EV sales of the presence or absence of a distance based road user charge (RUC).

New Zealand introduced RUC for EVs on 1 April 2024.

Australia has no RUC for EVs.

Iceland had introduced RUC for EVs on 1 January 2024 and expanded it to all vehicles on 1 January 2026.

New Zealand's RUC rate for light EVs is the same rate for light diesel vehicles, and broadly equivalent to petrol tax.  That rate is NZ$0.076/km including GST of 15%.  Excluding GST this would be US$0.038/km or US$0.06 per mile.

Iceland's RUC rate for light EVs is ISK6.95 per km or around US$0.06 per km or US$0.1 per mile.

The result is fairly clear. There is no significant relationship between the introduction of RUC and EV sales.

Nine months after Iceland introduced RUC on EVs, sales grew and have continued to grow as a proportion of new light vehicle sales.  

In New Zealand there was no drop at all, although sales remained slow and only picked up recently, this is mainly attributable to poor economic growth and the after-effects of the removal of a major subsidy to buy EVs that was scrapped at the end of 2023 (bringing many sales forward before that time). 

Meanwhile, Australia, which has no RUC at all, has only slightly higher EV sales than New Zealand (although Australia has lower fuel tax, and higher incomes).

The oft-cited claim, seen in Australia, the UK and the US, is that requiring EV owners to pay to use the roads would deter their sales, relative to non-EVs, is largely specious. While lobbyists in those jurisdiction get political and media attention for their claims, the reality - in jurisdictions that actually have introduced mandatory RUC for EVs, is that it makes next to no difference.

New Zealand Transport Minister recognises road pricing as a tool to defer new road capacity

It’s extraordinarily rare for politicians leading transport policy to understand road pricing beyond one dimension. Either they think it is a great way of raising money they can spend on projects that they can sell to the public, or it is a great way of reducing traffic, it’s rare to see an understanding of economics.

In New Zealand it is seen with the current Minister of Transport, Hon. Chris Bishop.  For context, New Zealand has recently passed legislation to allow for time-of-use road charging, the term used in New Zealand for congestion pricing. It will allow local authorities, in partnership with central government, to set up road pricing schemes specifically targeted to reduce congestion. Auckland is already some way ahead in developing recommendations for congestion pricing and is expected to advance proposals in the coming year.

The primary purpose of congestion pricing in New Zealand will be to reduce congestion, noting that such pricing will also generate net revenues, which will be used subject to agreement between central and local government. This will likely see net revenues directed towards a range of transport projects in the city or district where the pricing scheme operates.  

However, there is another feature that road pricing enables, beyond raising money and getting better use of existing road infrastructure, which is to provide information on where better to direct future road capital spending.

Bishop hinted at this in February 2026 when the National Infrastructure Plan was released by the Infrastructure Commission. It noted that road pricing could “defer the need for expensive capacity expansions”.

Radio New Zealand reported on 18 February 2026:

Asked whether time of use charging should be used first before committing funds to two tunnels, Bishop said it was an option under consideration and he would have more to say soon.

"I'm not cancelling the tunnel, but we are giving active consideration to what time-of-use pricing might do to our transport projects. You have to factor these things in, because thay are a mechanism for demand management and making more efficient use of our infrastructure, which is exactly what the commission says."

The project referred to is to duplicate two tunnels in Wellington city (known as the SH1 Wellington Improvements project), both of which are subject to significant congestion at peak times (and frequently off-peak times). It's a project primarily about congestion, but also resilience (the Terrace Tunnel has one-lane southbound, and Mt Victoria Tunnel is 95 years old with only one-lane in each direction) and helping to move traffic from the waterfront highway (which acts as a backup to the network, but separates the waterfront from the central business district). 

Wellington State Highway 1 network issues

Proposed second Wellington Terrace Tunnel (northern end)

Proposed second Mt Victoria Tunnel (western end)

Both tunnels are part of State Highway 1, which is the main highway into the city, but also bypassing the city centre towards the airport, eastern and southern suburbs. Congestion pricing would be likely to reduce traffic on this route, particular traffic using the tunnels to drive into the central city.

The current New Zealand Government went to the previous election promising to build the project. That may still happen. Finance Minister, the Hon. Nicola Willis, has said it will proceed. 

Of course the simplest, and possibly least controversial option, would be to proceed with the project, and introduce time of use road charging to help pay for it, but also manage demand from the additional capacity, by placing a cordon within the boundaries of State Highway 1. This would mitigate fears that the new capacity would induce demand away from public transport for trips into the central city, ensure that the new capacity worked efficiently.

Yet the most economically efficient option is to introduce pricing in advance, to determine if it would sufficiently reduce demand to defer the need for the new tunnel capacity.  That is certainly worth investigating.  There are two key elements to this approach:

• What sort of road pricing scheme should be proposed in Wellington, that would optimise network use?
• Can that proposed be sufficiently publicly acceptable to proceed?

I've doodled on a map of Wellington suggest a basic cordon concept that might work (inbound AM peak, outbound PM peak) that puts most of the central city behind it, which is also the area with the most intense public transport service (and is accessible on foot and cycle for inner city suburbs as well). 

Wellington Time of Use Road Charging cordon concept

Leaving aside a lot of details (e.g. keeping Oriental Bay and Mt Victoria outside the cordon, where to draw the line in Te Aro), the idea is the through route of SH1 isn't priced, because use of it is much less amenable to modal shift, so the first priority should be to encourage modal and time of use travel shift to and from the central city, with a second priority being to encourage time of use shifting predominantly through traffic (see below with lines on the main routes towards the central city from the north and the east).  Again the details on whether someone pays twice or just once, whether it be through the cordon or on State Highway 1 is a moot point, and the timing of operation might vary to manage demand, but this is only conceptual at this stage.

Second stage Wellington time of use road pricing, tunnels in addition to cordon

What matters more fundamentally is that a Transport Minister is talking about it.  Demand and traffic assignment modelling would identify whether a reasonable price for a downtown cordon would sufficiently reduce traffic numbers to relieve congestion at the two tunnels, or whether by pricing the waterfront route, the 15-20% of traffic on that route that is bypassing the city relocates onto the unpriced tunnels, effectively leaving congestion at those tunnels where it was before.  Although some routes into the city would be relieved, and traffic flow within the city would improve, if it meant no net improvement to traffic along the route the SH1 Wellington Improvements project was intended to fix, then it would be likely to generate some public and political opposition. Moreover, it would not dissipate calls to build the highway improvements.

However, if pricing was also placed on the tunnels, as well as the downtown, then it might make a difference if there was sufficient traffic with enough demand elasticity to be priced away from driving in the peaks.  

What next?

The New Zealand Government has a fiscal problem, in that it (like so many governments) has ambitions for capital spending on transport projects that it is struggling to fund. The temptation to delay or defer a project like the SH1 Wellington Improvements project is significant.  I expect there to be considerable analysis on the potential for tolling the project (as is the policy of the government), but just tolling the tunnels is problematic, as there are alternative routes (which are inferior, and which analysis has indicated it is preferable to attract traffic from as it is an urban setting, rather than encourage traffic onto). I very much doubt tolling is suitable for this project given tolls are likely to worse congestion on key bus routes rather than improve them.

Time of use road pricing in Wellington is likely to have merit regardless of the SH1 Wellington Improvements project, so should proceed, but there will be a political debate about use of the net revenues. I expect the Mayor and City Council to want to use net revenues to further their preferred projects, but the Minister will likely prefer supporting the tunnels project.

One option could be to use pricing to phase the SH1 Wellington Improvements project, so that the elements with the highest net benefit are advanced first (e.g. around the Basin Reserve, which is a troublesome bottleneck only partly related to tunnel capacity), and tunnels are built in a sequence reflecting demand impacts from pricing.  

Whatever happens, it's a great illustration of the key benefit that road pricing can bring, which is a reassessment of the merits of transport capital projects in the light of pricing. For example, it is also possible that road pricing could improve traffic flow for buses, that the need for additional bus priority measures erodes. That has its own political implications for those advocating taking road space from general traffic to give to other modes. It makes it easier to do it, but also reduces the case to do it.  What helps is there is the political will to be rational about this, hopefully this will persist regardless of the outcome of the New Zealand General Election later this year.

For the sake of my many overseas readers, some might note that Bishop is from the centre-right National Party, which is in coalition with the free-market liberal ACT Party and the nationalist-conservative NZ First Party. New Zealand's Parliament passed the  Land Transport Management (Time of Use Charging) Amendment Bill unanimously, including the three opposition parties.  I am unaware of any national Parliament anywhere in the world which showed unanimous support for enabling road pricing by time of use.

When IS the right time for Australia to introduce road user charging?

RUC is a current issue in Australia

I was fortunate enough to be moderating a panel at this year's ITS Australia Roads, Tolling and Technology conference in Sydney on 25 March 2026.  I also presented on the topic separately.

It was a panel discussions about road user charging and I was honoured to be moderating such a stellar panel of expertise, namely:

• Professor David Hensher AM, Founding Member of University of Sydney's Institute of Transport and Logistics Studies;
• Bianca Slack-Smith, Director Legislative Reform and National Policy at Transport for New South Wales;
• Adrian Dwyer, CEO of Infrastructure Partnerships Australia;
• Hon Paul Fletcher, Advisor at Compass IOT and former Minister of Urban Infrastructure and Cities (2016-2018), and Minister of Communications, Urban Infrastructure, Cities and the Arts (2019-2022);
• Daniel Antonello, CEO of Here Technologies. 

The panel discussed a wide range of issues. The broad conclusion was that distance based road user charges (RUC) should be introduced, starting with EVs, and be focused on replacement of fuel duty revenue. The rates should be set to be broadly equivalent to fuel duty, and it should be a simple, easy to implement system, with the potential to allow for more sophisticated solutions for those who want it.

Although RUC for EVs is an opportunity, especially for State and Territory Governments in Australia to access a new source of revenue, it should be focused on equity.  Equity being the point as to why people who can't afford to buy a new vehicle, let alone an EV, should pay to use the roads, but EV owners should not.

Starting now with EVs was seen as making little difference to EV sales, but making it much easier to implement than a time when there might be substantially higher numbers of EV owners - who would be opposed.

There should be a nationally consistent system, with a basic product (manual distance measurement and reporting) available for all, and digital/location based options available for those who want them (e.g. to avoid charging distance travelled off public roads). 

Previous efforts to advance heavy vehicle RUC were seen as not the priority for now, as it is too politically difficult, although heavy EVs should be part of any RUC system.  

Any net revenues were proposed to be used, for the first few years, to support expansion of the public EV charging network, to help address range anxiety, although longer term such revenue might be used to support funding of road maintenance (noting fuel duty has not been hypothecated in Australia for over 30 years). 

So following that event, it is worth noting where Australia is right now:

• Federally, the Commonwealth Department of Infrastructure has set up a RUC Task Force to investigate policy options.
• Legislated is in force in New South Wales to implement RUC for EVs and PHEVs from 1 July 2027, and the NSW Government has indicated it would proceed to implement RUC whether or not the Commonwealth Government proceeds with a nationally consistent approach;
• A High Court of Australia decision (Vanderstock vs. the State of Victoria) ruled Victoria's RUC system for EVs and PHEVs was unconstitutional.

Many State and Territory Governments are supportive of RUC for EVs, not just for revenue, but also because it means EV owners pay to use the roads (whereas at present arguably bus passengers pay more to use the roads than EV owners), which will moderate driving particularly in cities. 

However, the big stumbling block is whether there will be a single national RUC charge, similar to fuel duty, which the Commonwealth will need States and Territories to collect, or if the Commonwealth might at least enable States and Territories to collect RUC.

The prospects for this have varied over recent years. Whilst Treasurer Jim Chalmers is reportedly in favour of it, Transport Minister Catherine King has been reported as being sceptical that any legislation could get through Parliament. She noted concern that any RUC would hinder EV sales.

This last point is argued by EV importers who, of course, support every single measure to subsidise or discount EVs and their use of the roads, and treat any measures to equalise their treatment with other vehicles as harming Australian progress towards reducing emissions.  Besides obviously being self-serving, there is not good evidence that RUC hinders EV sales.

Iceland introduced RUC for EVs in 2024, when EV sales were high. However today 33% of light vehicle sales are EVs in Iceland. In 2026 Iceland abolished fuel duty and put ALL vehicles on RUC, but it has had little apparent impact on vehicle sales, largely because EVs still cost 55% less to operate than petrol vehicles (see below from Iceland. 1 ISK = US$0.0082).

Hawaii introduced a choice of RUC or a fixed annual fee for EVs from 2025, and 7% of light vehicles sold in Hawaii are EVs (5% are PHEVs). New Zealand introduced RUC on EVs from 2024 (following abolition of a subsidy scheme that was signalled to be removed at the end of 2023), and EV sales were 6% of new vehicle sales (before the Iran-US conflict) with PHEVs at 5% of the market.  Since the beginning of the Iran-US conflict, EVs have reached 16% of new light vehicle sales in New Zealand, with a RUC of around A$0.06 per km.  It was just under 15% across Australia, with no RUC.

Essentially, paying a relatively small amount to use the roads has little real impact on the benefits that EVs provide in reducing running costs.

But there is a bigger issue.

How road vehicles are charged and taxed has little coherent basis in Australia. Australia has some of the highest vehicle registration fees in the world, primarily because these are fees collected by States and Territories (which don't collect fuel duty).  It's fuel duty, collected nationally, in usual conditions (it is half price because of current petroleum prices), it is neither hypothecated, and heavy vehicle owners pay a significantly reduced rate compared to light vehicle owners, because... heavy vehicles are subject to a fuel and registration based "road user charge" (which is just fuel tax and registration set at rates that are meant to try to reflect costs attributable to such vehicles). 

There is little political appetite let alone mandate for wholesale reform, as badly as it is needed, but a start would come from enabling States and Territories to charge the largest portion of the vehicle fleet that pay literally nothing to use the roads.

No one can rationally doubt the relative environmental benefits of EVs, but driving an EV in inner Sydney is not more environmentally friendly than taking the train or bus. It uses roadspace, it contributes to congestion, and relies on the maintenance and renewal of roads, which are enormous capital intensive assets.

There's little evidence that RUC on EVs affects sales. 

There is evidence that delaying RUC on EVs makes it harder.  In the UK it is highly controversial, in California it is approaching 10 years since it was first studied and piloted, and it seems as far away as ever.

The Commonwealth should set a date for a national EV RUC that is expects all States and Territories to collect. It should also allow them to collect their own, and might develop a framework within which that should operate. This should include rules about off-road use, about open standards for digital means of measuring, reporting and collecting RUC, rules around what account such revenue goes to, and around rate setting.  The NTC could have a role in this, as it does with the fuel/rego based "heavy vehicle road user charge".

Meanwhile, it should let States and Territories proceed themselves within such a framework, starting 1 July 2027 (to match NSW).  It should start with EVs and PHEVs, including heavy EVs, and the signal should be that it will be extended to other vehicles in due course, such as battery-electric hybrids and other new vehicles.

The easiest time to do this is now.

Terminology: Road user charging, tolls... what do people mean?

I've written about this before, but I thought it was timely to repeat the point...

Early on with this blog I bemoaned the plethora of words that have been created to mean different ways of pricing for road use, and the willingness of different jurisdictions to mix and match these terms.

I tend to use the following three terms to mean separate pricing concepts:

• Tolls: A fee, which may or may not vary by vehicle type, direction of travel or time of day, for using a specific segment of road infrastructure. Commonly bridges or tunnels, but also frequently new sections of motorway, superhighway to provide a faster, more direct connection than the pre-existing route. Tolls typically charge fees for passing specific points on that section, either a single entry or exit point, or multiple points. Most tolls exist to recover the capital costs of construction and the maintenance/operating costs of the tolled infrastructure, but some persist beyond the “payback” period for the road, and are used for other purposes. 

• Road User Charge (RUC): A fee which charges for use of a road network, based on consumption of road space through distance. It typically varies by vehicle type and may vary by location and/or time of day (but not necessarily except by identifying being on the priced network).  In some jurisdictions fees may vary by emissions category of vehicles. Fees are typically metered or by prepayment of distance. RUC exists to recover network wide road costs, and to reflect differences in consumption of road use, and for heavy vehicles different costs generated from network use.

• Congestion charging/pricing: Fees set based on time of use and location for the use of a road, set of roads, or network of roads (or a lane or lanes on a road). These may range from a single all day pass to use the priced road, or metered use of the priced roads. There will be a variation by time of day, with higher prices at peak times of demand, and there may be variations based on direction of travel. Congestion pricing is usually designed to change behaviour, reducing congestion or emissions. However, many jurisdictions design them to raise revenue to pay for specific infrastructure projects, including non-road infrastructure.

There are variations which crossover between these. Toll lanes and HOT lanes, look a lot like toll roads (but not all lanes) and congestion pricing (because they don’t operate a single price 24/7).  However, I will fail in having a universal application of these definitions because….

In Europe, road user charging is called “tolls” usually. Why? Because EU Directive 1999/62/EC… defines tolls (Section 2(b))

means payment of a specified amount for a vehicle travelling the distance between two points on the infrastructures referred to in Article 7(2); the amount shall be based on the distance travelled and the type of the vehicle

European Commission Directives call distance-based road charging “tolls”. This is why when “truck tolls” are discussed in Germany, Poland, Bulgaria, Belgium etc, it isn’t meaning a handful of roads being tolled, but an entire network. Although most European countries don’t apply charges to all public roads (Switzerland and Iceland are notable exceptions), most of these systems resemble road user charging systems, not tolls.  Of course, Austria and Slovenia look a lot like toll systems, because they use toll technology (DSRC toll tags) to measure road use on motorways for heavy vehicles, with fees based by distance. That’s where tolling and RUC look similar, noting that the technology used in both systems is not scalable to the entire road network, unlike the GNSS telematics-based systems in Germany, Belgium, Denmark etc. 

What IS called a “road user charge” in the EU, is actually a “vignette”. It is defined as:

means payment of a specified amount conferring the right for a vehicle to use for a given period the infrastructures referred to in Article 7(2)

That is a time-based prepaid charge for access to a national highway network, based on purchasing a set number of days. The Eurovignette (which only applies in Sweden, Luxembourg and the Netherlands (until later this year)) is the most well known example. Vignettes are being phased out, but they are legally called a “road user charge”. Therefore if you talk about RUC with Europeans, they may think you are talking about vignettes. 

In the UK, congestion charging is legally called a “road user charge”. That being a fee imposed for using a specific road or area. Local authorities (and the Secretary of State for Transport) can set up such schemes. They might resemble tolls (the Dartford Crossing is a "road user charge”) or congestion charging (“Durham”), and could be distance based on the specific road or area, but that’s not quite network wide distance-based road user charging.

In the US, congestion pricing is often used to refer to managed toll lanes or high-occupancy toll (HOT) lanes, because there are around 40 of these, and only one actual congestion charging type scheme – New York.  That of course confusingly has been called the Lower Manhattan Toll but is now the Congestion Relief Zone.

Also in the US, there is RUC, which is called Road Usage Charging (not User), because that is what Oregon chose to call it. There are also five weight mileage taxes (WMT) which are essentially RUC systems for heavy vehicles. However, they are not related to what those states are doing on RUC, as in the US, RUC is almost always about light vehicles.

Just to add to the confusion, Australia has a Road User Charge, which is not a toll, congestion charge or distance based charge, but is the component of fuel tax that heavy vehicles are subject to pay (they are entitled to refunds of the remainder when travelling on public roads, and a full refund of fuel tax when travelling off public roads). Australia's Road User Charge is a fuel tax on heavy vehicles.  This is entirely separate from Australia's policy and political discussions about a distance based road user charge, whether for electric vehicles or heavy vehicles to replace the fuel based road user charge.

I could add the other confusion, which is that heavy vehicles in Australia cover any vehicles with a gross registered mass of more than 4.5 tonnes (whereas in Europe and New Zealand it is over 3.5 tonnes). In the United States heavy-duty vehicles are those over 26,000 US pounds (around 11.8 tonnes). Vehicles from 10,000 US pounds (around 4.5 tonnes) to 26,000 US pounds are medium-duty.  Medium duty vehicles are not a category in Europe or Australasia, which sees them all as heavy vehicles. 

Confused?

It would be easier to call everything the same.  RUC is a great term, except in the UK and Europe.  Tolling is a great term, except in the EU where it also means types of RUC.  What really matters is what is behind the title, meaning:

• What configuration of roads are being charged? (a single point or a whole network)
• What is the chargeable event?
• What is the basis of the fee?
• What is the purpose of the fee?
• How is the chargeable event measured?

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.