Tuesday, 14 April 2026

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:

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.

Wednesday, 11 February 2026

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?

Tuesday, 10 February 2026

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.

Monday, 9 February 2026

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!)