US Federal Highways Administration terminates agreement authorising New York congestion charge

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

Dear Commissioner Dominguez, Commissioner Rodriguez, and President Sheridan:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Some of the big questions are as follows:

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

Principles of road user charging design in Iceland

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

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

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

- Kilometre Tax

- Fuel tax

- Carbon Tax

- Energy cost

- Annual vehicle fee

- VAT

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

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

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

The main website for the charge is here.

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

Denmark heavy truck RUC road network until 2028

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

The stages are as follows:

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

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

Rate structure

There are three weight categories for 12 tonne and above:

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

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

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

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

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

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

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

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

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

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

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

What's significant about Denmark?

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

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

What about light vehicles?

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

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

Who's next? 

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

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

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

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

Australia and road user charging

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

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

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

Very brief history

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The big test will be tomorrow of course.