Funding roads in the electric future
In a recent blog, I made the case for regional petrol taxes, which would allow district and town authorities to resource the infrastructure projects they need. One issue I didn’t cover is the long-term viability of petrol tax as a way of paying for the costs associated with road transport. As electric vehicles (EVs) make increasing inroads in the market in the coming decades, petrol taxes will become irrelevant.
The eventual death of petrol vehicles is an opportunity for us to tax and fund smarter.
As it stands, every kilometre you drive in a light passenger car costs you roughly 7 cents in petrol excise tax (including GST). That’s about $1.80 for the average daily Auckland commute. While this might sound like a small amount, on average it soon adds up to roughly $800 in excise tax over a year. All this tax goes into a central pot that trickles down to the regions via the National Land Transport Fund, or if your road meets a “national significance” or some form of a marginal electorate political test.
As we anticipate a largely petrol-free future, current taxes could be replaced with a smart toll system that charges a set rate for the roads you travel on, with those tolls returned to the areas you drive through. This would depoliticise the funding and give local communities what they need to pay for roads of not quite national significance, but still really important to the local community. If you mostly drive in Auckland, Auckland gets your tax to fund its roads. If you mostly drive on state highways, the central government gets your money. When you drive in Thames on holiday, Thames gets the revenue. International tourists travelling the length of the country split their bill with every place they visit. It’s not centralised, it’s smart.
The second advantage of a smart road tolls system is that it would also allow for variable pricing. This would enable congestion or peak time charging to smooth overall road use. It also enables discounted travel for people in need or for essential services. If a firm chooses to drive trucks through Auckland at peak hours they might well pay a premium for doing so. Holiday or tourism hotspots with small populations could adjust the price for non-residents, or increase the toll at peak times to ease the burden of providing the infrastructure needed to cope with short-term visitor influxes. Further incentives can be created for people to rethink the viability of public transport.
A non-petrol vehicle future combined with technological change is a huge opportunity to rethink how we gather revenue and fund our transport and infrastructure networks. There are smarter options than the current centrally controlled, trickle-down model. New Zealand needs to consider smart road tolls as a way forward to overcome congestion, fund growth and tourism related expenses and return revenue to the regions needing to fund roads and infrastructure of local significance.