Road Pricing

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

2026-02-11T18:15:00.002+13:00

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?

2026-02-10T21:00:00.004+13:00

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

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

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

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

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

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

How is it being implemented?

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

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

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

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

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

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

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

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

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

How often must you pay?

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

How much are vehicles being charged?

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

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

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

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

Exemptions

Three categories of vehicles are exempt:

- Vehicles for use by rescue teams

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

- Vehicles owned by foreign embassies and diplomats.

Fuel tax?

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

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

Lessons to draw?

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

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

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

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

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

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

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

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

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

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

California's Road Charge - A study in policy paralysis

2026-02-09T22:07:00.004+13:00

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

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

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

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

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

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

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

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

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

Leahey's article states:

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

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

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

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

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

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

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

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

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

2025-12-01T10:26:00.003+13:00

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

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

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

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

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

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

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

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

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

Why?

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

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

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

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

EV vehicle sales

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

How much will it be?

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

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

How will it work?

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

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

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

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

What about foreign vehicles in the UK?

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

What about mileage driven outside the UK?

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

Is it just about odometers?

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

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

What's the money to be used for?

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

What's next?

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

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

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

2025-11-12T18:53:00.002+13:00

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

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

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

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

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

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

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

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

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

Objective

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

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

Timing

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

What's next?

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

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

Of course nothing is guaranteed.

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

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

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

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

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

Switzerland consulting on RUC for electric vehicles

2025-11-11T10:58:00.002+13:00

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

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

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

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

Background

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

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

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

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

Options

The two options being considered are:

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

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

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

Consultation

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

Consultation concludes on 9 January 2026.

Thoughts

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

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

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

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

2025-11-06T18:14:00.002+13:00

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

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

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

Why?

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

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

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

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

How?

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

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

Reaction?

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

Hasn't the UK been here before?

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

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

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

Issues?

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

Some other obvious questions:

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

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

What's next?

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

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

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

2025-10-06T12:19:00.004+13:00

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

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

The bill also includes:

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

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

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

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

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

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

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

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

Around 2% of light vehicles in Oregon are EVs.

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

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

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

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

Australia pursues road user charging... again...

2025-08-27T19:21:00.006+12:00

There has been a lot of coverage in Australian media of the idea of a national road user charge (RUC) being applied to electric vehicles (EVs), mainly in the context of the Australian Government’s recent “Productivity Summit” (officially called Economic Reform Roundtable) which sought to bring together government, business, unions and other non-government organisations to generate ideas to reform Australia’s economy.

The themes of that event were:

Making our economy more productive.
Building resilience in the face of global uncertainty.
Strengthening the budget and making it more sustainable.

So it isn't just about productivity, but also economic resilience and strengthening the government's budget. This is where RUC comes in, it is all about budget sustainability.

In 2022, there were already forecasts of where declining fuel excise revenue would lead in Australia. By 2032, the loss would be around A$3.5b per annum in 2022 values.

Forecasts of Australian fuel excise revenue

Australia started with heavy vehicles

Australia has been interested in RUC for literally decades. From the early 21st century there was recognition of the limitations of the status quo, particularly for charging heavy vehicles. The key issues being the mismatch between what heavy vehicles are charged to use the roads (through fuel excise and weight based registration fees) and the supply of road capacity that matters to them. From the COAG (Council of Australian Governments) Road Reform Agenda and the subsequent Road Reform Project, it was established early on that productivity gains from RUC in Australia would only be fully realised alongside supply side reforms. In other words, the revenue generated needs to be spent on improving infrastructure for heavy vehicles, with transparency around ensuring universal service. From 2011 the Heavy Vehicle Charging and Investment (HVCI) project was run through till 2014, and although a lot of work was produced, it didn't deliver any reform. It cost around A$25m involved a Secretariat set up in Melbourne and over 75 reports were produced, but very little happened. It was a policy wonk's dream, but didn't bring the industry on board.

This was followed by the Heavy Vehicle Road Reform (HVRR) programme, which itself has lost momentum after several years. In 2015 the HVRR roadmap was agreed, which you can see below:

Australia's Heavy Vehicle Road Reform roadmap

It was an ambitious reform agenda, it would have seen heavy vehicles subject to direct user charges, the revenue of which would go into a hypothecated fund and investment from that fund co-ordinated based on the priorities of users and broader community service obligations (in particular, ensuring a basic level of service across the rural public road network). An independent economic regulator would set the RUC for heavy vehicles based on what is needed to pay to secure agreed service standards and capital investment, and road managers would be required to deliver those service standards.

In short, it wasn't about just RUC, but about roads operating more like a regulated utility for heavy vehicles. Progress on this has been slow with reporting indicating that only Phase One has been delivered (greater transparency on expenditure investment and delivery). Changes in Government, particularly Ministers, but also the change in Government in 2022 have seen this programme get a low priority. This is unfortunate, given the Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA) website indicates that the economic benefits of reform are "estimated to be between $6.5bn and $13.3 billion in net present value over 20 years (7% discount rate)".

It seems rather an omission for an economic reform roundtable to not ever utter a word about this.

Most recent progress saw the implementation of the National Heavy Vehicle Charging Pilot from 2019-2024, with one small scale trial and a three phase large scale trial. This was the largest pilot of RUC in Australia. It was primarily an engagement exercise with industry, but also tested multiple technical solutions as well as gathering data on portions of the heavy freight and bus sector to inform policy advice.

The potential to get better investment in the road network, including better results for truck operators in particular, by eliminating network bottlenecks (in particular weight-restricted bridges) and enabling wider network access perhaps should have got more attention. Given the agenda on road reform has been bipartisan by-and-large (with the COAG work being undertaken under both Coalition and Labor Governments, and likewise the HVRR work started under the Coalition continued under Labor. Note also that progress on this is dependent on support from States and Territories, but is highly dependent on Federal leadership.

However, HVRR and heavy vehicle RUC doesn't promise much progress on new revenue, so it got less state interest than RUC on vehicles that are not subject to fees to use the roads - EVs.

RUC for EVs

Although talk of RUC for EVs is being said to be in the context of productivity, if politicians and officials were honest, it isn’t really about that. At a stretch, there is an argument that EVs get “overuse” due to them not being subject to any fee or tax to use the roads. This means EV use, particularly in cities where there is a greater chance of alternative modes of travel, is excessive, and more efficient (and productive) use of road space may come if EVs are subject to a RUC that reflects a fair allocation of the costs of maintaining and developing the road network.

However, it is important to be clear that RUC for EVs is about government revenue, it does not have momentum for any other reason. It is about "strengthening the budget and making it more sustainable".

It's pretty obvious what this is all about, although it is also clear that the impact of EVs on fuel duty revenue is fairly minimal so far. There is much greater impact from more fuel efficient petrol vehicles, and in particular battery electric hybrids. Putting RUC on EVs (and plug-in hybrids) is a first step.

In parallel with Heavy Vehicle Road Reform, then Infrastructure Minister Paul Fletcher did try to get a study up and running on investigating options for RUC for light vehicles, focused on this issue. However, the Morrison Government abandoned this early, which was clearly a mistake.

Of course Victoria tried to do it at state level, but had its "RUC" overturned by a court case that ended at the High Court of Australia ruling it as unconstitutional. I wrote about that already. Meanwhile, New South Wales has passed its own legislation which will see a RUC commence in July 2027 for EVs, Western Australia also has similar legislation. So the pressure is on the Commonwealth Government to develop a national framework for what looks like a patchwork of State and Territory based RUC. That raises a whole host of issues.

I wrote about some here. Technology isn't one of them, neither really are the issues around how to implement it. The biggest issues are around governance including:

Whether there should be a Federal RUC that is one rate, and separate State and Territory RUCs?
What rules, if any, will apply to the use of revenue collected by either RUC?
Who sets the rates at Federal and State/Territory levels? Will rate setting be subject to any independent oversight (e.g. the National Transport Commission or the ACCC)?
What happens if/when RUC expands beyond EVs to include plug-in hybrids (which pay fuel excise) and battery electric hybrids? Shouldn't policy on this include all new powertrains, and consider what to do about very fuel efficient petrol powered vehicles?
How should heavy EVs be treated?
How should travel across State/Territory borders be addressed for State/Territory RUC?

What's next?

One of the outcomes of the Economic Reform Roundtable appeared some agreement to progress RUC for EVs. In an interview on the ABC TV current affairs show Insiders, Treasurer Jim Chalmers answered a question on the topic from Insiders host David Speers:

Speers:

I just wanted to ask you quickly on the road user charge that’s coming. You’ve got to work out the details with the states and territories. Is there a chance that motorists might have to pay both fuel excise and road user charge, or can you rule that out?

Chalmers:

No, our focus in road user charging is on electric vehicles. We’re not trying to work out ways to double‑tax internal combustion engines. We’re trying to make sure that people who drive EVs, increasing numbers of people who drive electric vehicles, are making a contribution to the upkeep of the roads that they use. It’s fundamentally about making the system a bit fairer.

We’ll take the time to get it right. The states are putting together an options paper for us to consider at our meeting, before long actually, the 5th of September, and so we’ll go through that.

The main point of contention at the reform roundtable was actually whether a road user charging regime focused on electric vehicles begins with heavy electric vehicles like electric trucks, and there’s some kind of sequence after that, or whether we be more ambitious earlier.

So, we’ll work through all of that. I don’t want to predetermine the discussions I have with the states or the considerations of our Cabinet, working with Catherine King and Chris Bowen and the Prime Minister and others. But we have made it clear, we do think a change is warranted here, and we’ll take the time to get it right.

Now it's important to remember that fuel excise duty in Australia is not hypothecated towards road spending, so the claim this is about a contribution to the upkeep of the roads is strictly not true (this is unlike fuel duty and RUC in the United States and New Zealand). He claims whether starting with heavy electric vehicles would be useful first step. I would hate to be a naysayer on this, but it frankly seems like a wasted effort. There are so few heavy electric vehicles that it would generate little revenue, and would teach state governments little about setting up systems for private individuals driving light EVs (and unless there is a programme for wider heavy RUC, it's not clear what the point of starting with heavy EVs is).

For what it is worth, there is merit in enabling both a national and a state/territory RUC rate, and to take some of the principles of HVRR in having independent price regulation, an investment programme based on what users need and a hypothecated fund that at least collects enough money to cover the costs of maintenance and renewal attributable to light vehicles.

Allowing States and Territories to set regulated RUC rates to cover a portion of their costs in maintaining their road networks would be a start, on condition they also collect a national RUC. A key issue will be how to address cross border travel with State/Territory RUC if location enabled distance measurement isn't mandated (and it is likely not to be, at least for light vehicles), but there are ways to do this seeing the experience in the US.

In the absence of any Commonwealth action, there is likely to be a NSW RUC from 2027 given the legislation that has been passed, and the eagerness for NSW to differentiate itself from the Vanderstock court case that brought down Victoria's Zero Emission Vehicle Fee.

There is a lot to do, but the direction of travel on RUC policy is positive, let's just hope that momentum isn't lost for this, as it appears to have been for heavy vehicle RUC.

It is understandable that Australia can't easily follow Iceland and New Zealand given scale, and New Zealand's long history in having RUC for diesel vehicles, but it can follow the United States which is pushing on with RUC at the state level as well as investigating it federally.

Meanwhile it ought to completely ignore the distractions of some academics who want this to be the introduction of full network road pricing. That would be the death knell to RUC as it has been in the UK, Netherlands and Finland.

(Disclosure: My employer Milestone Pacific acquired in 2021 by CDM Smith, advised the Department of Infrastructure, Transport, Regional Development, Communications and the Arts on the National Heavy Vehicle Charging Pilot. I was the PM for that advice).

Dubai converts Salik from an urban toll to a congestion charge

2025-08-20T01:06:00.001+12:00

On 1 July 2007 Dubai was an early implementer of what might have been seen as urban corridor road pricing, if it had applied pricing based on time and location. At the time it was Singapore, London and Stockholm that were the predecessors (although arguably Norway's toll rings were as well), with Dubai suddenly being the leader in the Middle East for tolling existing roads.

Map of Salik toll points

Salik was introduced as a corridor tolling scheme on major highways, not to pay for their construction or maintenance, but to raise revenue and improve traffic management. It was introduced using sticker tag toll technology, but the blunt pricing structure applied (with flat rate tolls on almost all routes) gave the strong impression that the Dubai Government bought the technology rather than a policy.

It was set up as a company to be the toll operator for the Emirate, generating revenues for shareholders. It is 75% owned by the Dubai Emirate sovereign wealth fund - Dubai Investment Fund. The remainder are held by private shareholders, as Salik is listed on the Dubai Stock Exchange.

There was a single rate for passing all toll points of AED4 (US$1.09) per passage with a cap of AED24 (US$6.54) until 2013 when the cap was lifted.

The key criticism of Salik was that it didn't do much for congestion, but rather saw traffic diverted onto parallel uncharged roads. Taxis were exempt from 2007 until 2013, which suppressed the impacts of pricing. When it was introduced, the Dubai Road Transport Authority reported a 25% reduction of traffic at one of the first charging points, with a 50% reduction in travel time, and another charging point reportedly had a 45% reduction in vehicle numbers. However, some polling indicated 70% of users were unhappy at the congestion diverted onto other routes. Although Dubai's recently built Metro had seen some trips (particularly taxi trips) shift mode, the impact overall has been minimal.

Salik has been expanded, with two new toll points added in 2024. Salik generated US$630 million in revenue in 2024. Detailed information on the system in 2024 is contained here.

That has changed substantially now.

On 31 January 2025, Salik became a congestion pricing based system with pricing that varies by time of day. As can be seen in the price schedule below it is now 50% higher in the AM and PM peak periods Monday to Saturday (with higher pricing during some periods in Ramadan), with no tolls 0100-0600.

The new time of use based pricing is expected to increase revenues by between US$16m- US$30m per annum. It will be interesting to see what results come from the peak charges, as there are few reports of the impacts so far.

Salik price schedule 2025

New Zealand's next steps to road user charging for all vehicles UPDATED

2025-08-07T15:59:00.005+12:00

I've written twice before (here and here) about the policy announcement from the New Zealand (NZ) Government around introducing road user charging (RUC) for all vehicles. This was a policy commitment by the National Party-led coalition government after it was elected in 2024.

On 6 August, Minister of Transport, Hon. Chris Bishop, has made a further announcement about this.

On the face of it, it looks like following Iceland to become the second country in the world to phase out fuel excise duty (FED) in favour of charging vehicles for road use by distance and vehicle class. For those who know about NZ's RUC system I don't want to go into detail as to how it works now (there is a Handbook with information here published by the NZ Transport Agency which manages the existing RUC system), but here are some very quick points for those unfamiliar with it.

NZ's RUC system

In NZ motor vehicles registered to use public roads either pay based on consumption of a taxed fuel (petrol/gasoline, LPG and CNG) or on distance based on vehicle class (RUC). In summary (I've omitted some details that are inconsequential, for the sake of pedants):

All RUC and Fuel Excise Duty revenue is hypothecated into the National Land Transport Fund (NLTF), which is used by the NZ Transport Agency (NZTA) (along with revenue from motor vehicle registration and licensing fees, and direct government funding from the Crown) to fund the National Land Transport Programme (NLTP), which is central government's funding of roads, public transport, walking and cycling infrastructure, rail and coastal shipping.
RUC rates are informed by a cost allocation model applying economic and engineering principles to future NLTP spending.

Depiction of how New Zealand's RUC rates are based on cost allocation

1.2 million vehicles in NZ are subject to RUC. This includes all heavy vehicles regardless of fuel source (vehicles with a Gross Vehicle Weight of over 3.5 tonnes) and all light vehicles that are diesel, electric (EVs) or plug-in hybrids (PHEVs). Around 80% of vehicles subject to RUC are light vehicles.
RUC raises NZ$2 billion (US$1.19 billion) per annum in net revenue, which is around 40-45% of the revenue to the NLTF. Fuel excise duty raises around the same from petrol powered light vehicles only.
The RUC system comprises prepaid distance licences, either paper or electronic. The rate structure for RUC varies by vehicle class and weight, based on a cost allocation model that allocates future spending based on the consumption of that spending by vehicle class/weight.
Over 95% of light RUC vehicles and a majority of heavy RUC vehicles are on the "manual system". This means regular checking of the paper RUC licence against odometer (hubodometer for heavy vehicle) readings, and purchases of new licences in blocks of 1,000kms or more either online or at retail outlets. Once purchased the new RUC licence is issued and is typically displayed on the vehicle windscreen in the bottom corner. At regular safety inspections, the odometer reading is recorded by the inspector and forwarded to NZTA to check against the latest distance licence.

Sample RUC distance licence as displayed on windshield

Over half of heavy RUC revenue is raised through eRUC system providers: Three companies offer eRUC, with electronic distance recorders that measure distance matched against locations, primarily for commercial vehicle fleets to more efficiently manage RUC and their vehicle fleets. These companies collect revenue for NZTA at virtually no cost to government, and attract commercial vehicle fleets due to the convenience of billing them for all vehicles, rather than monitoring and buying RUC licences for each vehicle. The three companies are telematics providers (EROAD, Teletrac Navman and RUC Monkey). The market for these systems was legally established in 2009.

Teletrac Navman electronic hubodometer

Early EROAD distance measurement device

Electric and plug-in hybrid light vehicles were added to the RUC system in 2024. This was around 120,000 vehicles with over 95% compliance.
Heavy vehicles are required to have either hubodometers or electronic distance measurement devices installed to be registered. This includes all heavy trailers, in order to capture variations in vehicle configuration that affect applicable RUC rates.

Hubodometer as required to be installed on all registered heavy vehicles

Distance travelled off public roads is not subject to RUC. Vehicles with eRUC automatically have off-road distance not measured to avoid consuming RUC, owners of vehicles on the manual system may apply for refunds through a manual (and time consuming) process. The same applies to petrol powered vehicles operating off of public roads and any other equipment using petrol. It is possible to apply for refunds of FED, but many do not do so because of the time and complexity required.
NZ has an Emissions Trading Scheme, which sees a cost of CO2 emissions included in the price of fuels used domestically in NZ. FED has never been designed to be an environmental tax, noting there is no FED on diesel. FED is a proxy road user charge.

What's the objective?

Revenue sustainability and fairness.

While FED is a very cost effective way of raising revenue, the variations in what petrol vehicle owners pay are considerable based not only on engine size but engine type. Although EVs are on RUC now, as are PHEVs (at a reduced rate to reflect their use of petrol), battery electric hybrid vehicles (BEHVs) and small fuel efficient petrol vehicles are paying much less per kilometre to use the roads compared to the average petrol powered car. There are already 350,000 BEHVs effectively paying half as much as all other light vehicles to use the roads.

In future years, rates of RUC and FED would both need to increase to reflect inflation and the Government's ambitions for significant capital spending on improved roads. While tolls are to be used to help with some projects, they will not be able to be applied to many capital improvements. Raising FED creates a distributional impact on those unable to afford new vehicles that are more fuel efficient or have different drivetrain technologies such as EVs, PHEVs or BHEVs. FED is simply no longer fair compared to RUC which can apply a flat rate across all light vehicles to reflect their use of the road network and the spending from the NLTP that benefits them all equally.

Putting all vehicles on RUC means that changes in vehicle technology won't affect revenue and future RUC increases will apply equally to all light vehicle owners, reflecting spending on land transport infrastructure.

What's going to happen?

RUC legislation will be amended:

to remove the requirement for paper RUC licencesa and prepaid licences. This will enable RUC to be billed based on past travel, rather than future distance travelled.
to enable use of telematics systems already built into vehicles as a means of measuring and reporting distance travelled, rather than simply the odometer or a third-party device.
Separating NZTA's role as regulator of electronic system providers and provider of the manual RUC system, to remove conflict of interest in encouraging competition in the supply of RUC service provision.
Allow tolling and future congestion pricing services (time of use charging in NZ parlance) to be bundled with RUC for those choosing to use electronic system providers, to avoid the need for multiple accounts.

The intention is that this should enable a wider range of technical and commercial options to measure, report and bill for RUC. With the existing market base of around 1 million vehicles on the manual RUC system, the potential should be there for new providers and technical solutions that are cost effective.

The expectation is that by 2027 a next generation of RUC providers and options will be available supplied by private companies, to attract existing RUC users from the manual system and make it easier to transition other light vehicles onto RUC.

No deadline for the RUC transition has yet been set, which is sensible as there are some major issues to work through.

It appears that the manual system will remain and that location will NOT be mandated as part of an eRUC system. This should help address concerns about privacy.

Unanswered questions

While there is a lot of speculation as to what will happen and when, some of the big issues remain to be worked out in the coming years. These include:

Will the manual RUC system remain in some form? There is an argument to retain it for vintage vehicles and some older vehicles that are not suited for third party devices for various reasons. Furthermore, retaining the manual system will address a raft of privacy concerns for many people, even if it is modernised to be based on reporting distance travelled rather than prepaid distance. On 7 August the Minister indicated that a manual option will remain for those who want it.
How will the transition be structured? Vehicles using a specific fuel can either be switched all over overnight or in groups, while having some means of exempting, refunding or crediting FED as long as it remains. There are merits and costs in both approaches, and there should be flexibility around FED to facilitate the latter by technical means.
Will RUC remain a single national rate for the time being? The merits of eRUC which includes location are minimal for light vehicles that don't go off road, so the transition raises questions as to wider reform of pricing roads. On 7 August the Minister indicated that location measurement would not be mandatory. Given the commitment to more tolls and time of use charging, location will be an option for those wanting to use eRUC as an interface to such systems, but they will remain separate policies. Existing governance structures are almost certainly not going to be able to deliver more disaggregated road pricing by location and time of day efficiently, and there are reasonable concerns as to whether future government may use it to act punitively against certain classes of vehicles in specific locations. Not mandating location should ameliorate those concerns.
How is non-compliance going to be managed? There are obvious merits in treating road as a utility, but there are costs too which are born by utilities. These are around customers at the margins of being able to pay invoices and those who seek to evade the system altogether (along with vehicle licensing and safety inspections). Existing RUC compliance is focused on heavy vehicle compliance generally, with one means of checking light RUC compliance, this is unlikely to be adequate for a system that will have 95% of its customers as private vehicle owners.
How will the market for eRUC service providers be adequately incentivised? It is not a brand-new market but the market for eRUC for private vehicle owners is almost non-existent under current settings. Some mix of mandating RUC and allowing a wholesaling of RUC may provide the answer to this, but other options may need to be considered, such as revenue sharing.
Will OEM (Original Equipment Manufacturer) telematics systems be opened up to enable use of data for RUC? Whether by OEMs or by legislation, being able to unlock the potential for these systems (which raises some issues in itself) for service providers to bill vehicle owners, will be important in maximising convenience, compliance and minimising costs.

Assuaging concerns

There may be some work to be done in convincing the public that FED will be abolished and people won't be paying twice. Associated with that will be concerns about RUC being used to raise much more revenue at higher rates, although this was entirely possible with FED (and for many years part of FED revenue was general Crown revenue not hypothecated to the NLTF. This was abolished in 2008 as the Government spending on land transport had been increased considerably, and there had been a successful political campaign for some years to end FED revenue being split between the NLTF and the Crown. One way of assuaging concern about rates would be to review and update the Cost Allocation Model used to inform the setting of RUC rates, so that it is at least seen as being based on economic calculation to generate revenue for specific land transport spending and not simply political whim.

There is also some concern about privacy, if everyone is required to have an electronic device or system that measures and reports distance by location (which isn't essential if RUC is going to remain a single national rate for some time). Other concerns are around use of data, especially the idea it might be used for speed enforcement. While it seems highly unlikely that the current centre-right government would want to implement such a policy, it is not inconceivable that a different government which seeks to rigorously pursue a policy of zero road fatalities and to discourage private motoring might use such a system punitively. The current eRUC system allows fleet operators to be notified if their drivers exceed speed limits, but this is entirely voluntary and does require real time tracking, which is not cheap to implement given data requirements (and is typically applied by fleet operators to ensure that their expensive vehicles and cargos are being protected). RUC legislation ought to be drafted to ensure that it addresses concerns around privacy and scope creep.

Ultimately this is a revolutionary move, far moreso than any of the US states moving towards RUC for EVs (with the possible exception of Hawaii which IS looking to transition all light vehicles onto RUC by 2033), and more than any countries in Europe, which all struggle to implement RUC on light vehicles. If successful, it will certainly put NZ at the leading edge of RUC internationally.

All of this at the same time as NZ is progressing legislation to enable congestion (time of use) pricing (see the Bill for that here), which is expected to be implemented using automatic number recognition technology in the foreseeable future.

UPDATED: Following a TVNZ news story which included an interview with Hon. Chris Bishop on 7 August which provided further elaboration of his intention, several elements of this post have been amended.

New York's Lower Manhattan toll has reduced congestion

2025-07-31T17:32:00.004+12:00

New York's congestion charge is of course ground-breaking in the United States as the first application of congestion pricing to all lanes on an existing road (of course express lanes have offered the choice of priced lanes in many cities and on many routes, and there are toll roads with higher peak charges, but congestion pricing on previously untolled roads is new).

The scheme has been in place now since 5 January, so is well bedded in. It is timely to look at the results so far. It is designed primarily to raise revenue, which is why charges apply 24/7 (albeit with a significant discount during 2100-0500 weekdays and 2100-0900 weekends), but that doesn't stop there being a noticeable demand impact. It should encourage both mode shift and some trip consolidation (fewer motor vehicle trips), and also some time shift close to the 0500, 0900 and 2100 time period cutoffs.

The conclusion after six months is that traffic flows better, transit patronage is up and there are considerable net revenues being generated from vehicles paying the charge (which unhelpfully is called a toll).

The National Bureau of Economic Research Digest reports an 8% increase in the speed of car trips within the zone and to the zone, with a 2.5% increase in speeds from the zone.

New York City traffic speeds

It also noted a 15% in average CBD speeds with a 20% increase in weekday afternoons (1300-1700) and 25% increase in weekend evenings (1500-2100).

The MTA has published data about vehicle entries and bus travel times.

In January, there was an 8% reduction in vehicles entering the charged zone compared to the baseline of the previous year. By June 2025 the reduction in vehicles entering the charged zone was at 14% compared to what was forecast had charging not been in place. It was down 10% in May, 12% in April and 13% in March. This is an ongoing trend, which should result in higher traffic speeds as well as improved air quality.

MTA also reports bus speeds. These indicate a modest increase overall compared to previous years, but the effects vary considerably when disaggregated to specific routes. Route B39 sees a 30% increase in speeds, M1 hardly any change, as it is obviously dependent on the impacts on specific routes.

Route M1 average speeds by month

Route B39 average speeds by month

With a flat fee for all routes, it is obvious some routes will see significant improvements, while others will not (either because they are much less congested anyway, or demand elasticity is different for different origin-destination pairs).

Transit use has gone up. Subway patronage is up 6-8% per month. Long Island Railroad, Metro-North Railroad and bus patronage are also up by similar percentages.

The PATH (subway from New Jersey) has seen patronage increases in all but one month since January of 7-11% per month.

Congestion pricing tracker website is more informative, as you can compare the driving times for a wide range of routes into the zone by time of day and day pf the week.

The Lincoln Tunnel has clearly sees reduced travel times during the day, but the Queens-Midtown Tunnel (which was already tolled) has seen little impact. Arguably in the mornings, there has been an increase, because those paying for the toll of this (and multiple other crossings) have the toll as a credit towards the congestion charge. This suggests some shift in chosen crossing to the tunnel because it is not longer punitively priced compared to the other crossings.

Lincoln Tunnel travel times

Queens-Midtown Tunnel travel times

Some of the data shows time shift around peak/off peak charges, but largely involving a slight increase before and after the change in charging times.

The website's conclusions so far are:

Overall, the policy has mostly reached its intended effects, at least directionally.

Traffic delays have decreased significantly across the board within the congestion zone, on tunnels and bridges to the zone, and even in the surrounding boroughs.

While time saved in traffic depends significantly on the route one takes, it has ranged from a few minutes shaved off an evening commute to a decrease of thirty minutes or more. Official MTA data shows tens of thousands fewer vehicles are entering the zone, resulting in reduced crashes and injuries.

Environmental effects have also been apparent: honking and noise complaints have more than halved in some areas of the Congestion Zone, and air quality has reportedly improved.

While long-term effects of Congestion Pricing will continue to evolve over the months and years to come and vary significantly based on individual experience, our current data paints an encouraging picture of the policy’s effectiveness.

Of course reduced travel times/ increased speeds are an obvious measure of success. Those paying are now getting a better experience, with improved journey times and less energy wasted (with lower emissions). However there is a lot of additional data needed to form a complete picture of the impacts. What I would hope to see by early 2026 is:

Route by route average traffic speeds comparing free flow, pre-charging and post-charging
Data on what happened to the reduced traffic (mode shift, higher vehicle occupancy, reduced number of trips, diverted trips) based on surveys
Compliance rates (proportion of vehicles paying the charge compared to those required to pay)
Complaints rates (numbers of formal complaints about charges)
Impacts on businesses located within the charging zone, including those relatively close to the 61st Street boundary (some may be winners, some losers if the charge deters some customers)
Data comparing local air quality within and just outside the charging zone before and after the charge was introduced

Will this encourage more congestion pricing in the USA?

It's too early to tell, but clearly the sky didn't fall in NYC, and there are some measurable and noticeable improvements in travel times and changes in behaviour. However, lower Manhattan is fairly unique in the United States. With the possible exception of downtown Washington DC, no other US city has a concentration of trips and employment so focused on its downtown that is responsible for much urban congestion (and lower Manhattan's geography lends itself to charging).

The big mistake will be thinking that the answer for each city will be to implement a cordon as seen in New York, particularly one that runs 24/7. This is the sort of nonsense that was seen when London was introduced, as it was assumed by some that every city just needed an area charge, but no others have ever been implemented.

New York is, so far, a success. It faces its charges being increased in future years to sustain those benefits, noting New York was introduced at a considerably lower rate schedule than was originally proposed as seen below. In 2028, the rates are going up by around a third on average, and another 25% in 2030 to meet the revenue targets desired. The impacts of both of those increases will be interesting, because it is likely they will be much more modest than the initial impact, but they may also prove to be politically more difficult.

New York congestion charge rate schedule page 1

New York congestion charge rate schedule Page 2

Hawaii launches the fourth light RUC programme in the United States, with much more to come

2025-07-08T13:13:00.001+12:00

Phase 1

1 July saw the launch of the fourth US state (following Oregon, Utah and Virginia) to implement an operational RUC system for light vehicles (as distinguished from the five states with weight-mileage taxes for heavy vehicles). Known as HiRUC, it follows two pilots and extensive consultation, and reflects the relatively high take-up of EVs in the state of Hawaii (3.5% of light vehicles are battery electric vehicles (BEVs) or plug-in hybrids (PHEVs).

HiRUC affects around 38,000 vehicles, being EVs with a gross vehicle weight of 10,000 pounds or less (around 4.5 tonnes).

Phase 1 of HiRUC provides a choice for owners of battery electric vehicles (BEVs) to either pay an annual fixed fee of US$50 or to pay per mile at a rate of US$0.008 (up to a cap of US$50). In effect, the RUC option means those who are likely to drive fewer than 6250 miles per annum can pay less.

The system will be implemented by odometers being checked at annual vehicle safety inspections and reported to the Department of Transportation. BEV owners will receive an invoice for RUC at the time of their annual registration renewal. The RUC invoice will be based on the vehicle safety inspection reading of the odometer. This will be the first US RUC system based on odometer readings at safety inspections. Vehicle at the time of re-registration will choose whether to pay the US$50 or go onto RUC.

Payment for RUC is collected at the same time as the registration renewal.

New BEVs will be placed on the flat fee at first registration, and owners can choose to remain on it, or switch to RUC after their first safety inspection.

It's important to note that this is meant to resemble the State Gas Tax, not the US Federal Gas Tax. Noting there is also County Gas Tax (and separate work underway to consider how counties could have their own RUC collected through the same means).

Vehicle owners that select a flat fee can change onto RUC at their next renewal (those on RUC have no need to, as their payments are capped at US$50).

Pilots

Before implementation, the Hawaii Department of Transportation undertook studies and two key pilots. The first was in 2019-2020 when 359,659 residents received Driving Reports comparing what they paid in fuel tax (based on miles driven and the average vehicle efficiency of their vehicle) to what they would have paid had there been RUC at the same level. This was an important start to engaging with the public on RUC as a replacement to the gas tax.

This was followed up by a pilot with 2,129 participants including a range of mileage reporting options. That included smartphone odometer imaging and plug-in devices (into OBD2 ports) with and without GPS location identification. Odometer image capture was most popular.

An archive of the previous work is available here, along with a factsheet about the new system and the relevant legislation.

Phase 2

From 1 July 2028, the fixed fee will be scrapped and all light BEVs will be required to be on HiRUC. Work on designing that transition is underway, as this will be the first mandated light RUC system in the United States (all others still have the choice of an annual flat fee or RUC). The obvious question will be whether the US$50 cap will remain in place, noting there is no such gap for the State Gas Tax.

Beyond 2028

Act 222 (the legislation introducing HiRUC) requires that HDOT to develop a Long-Term Transition Plan to transition all light-duty vehicles to RUC by 2033. So placing all BEVs on RUC is very much a step towards a much bigger shift. This will consider when and how to include PHEVs and other hybrid vehicles, but also all gasoline powered vehicles and the future of the State Gas Tax. Noting this is only for light vehicles, so medium and heavy vehicles will have to wait. The State Gas Tax can't be scrapped when those vehicles are paying it.

Still, no other US state has indicated a proposed deadline for transitioning ALL light vehicles to RUC. Only Iceland and New Zealand have such policies (albeit in both cases ALL vehicles), and almost certainly Iceland will be the first to achieve it.

Hawaii has a range of advantages. Its islands are small, there is not only no international nor inter-state traffic, there is very little inter-county traffic as there are no roll-on/roll-off ferries to enable people to take cars conveniently between the islands. Nevertheless, while there are stereotypes about Hawaii operating more slowly than the continental United States, that is all they are. Hawaii has shown that with some clarity of objectives, solid engagement with the public and stakeholders, and clear policy analysis around options, RUC can be implemented relatively swiftly and efficiently.

US Federal Highways Administration terminates agreement authorising New York congestion charge

2025-03-04T17:30:00.001+13:00

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

2025-02-26T19:00:00.001+13:00

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

2025-02-26T14:44:00.003+13:00

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

2025-02-10T13:23:00.003+13:00

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

2025-01-06T13:37:00.003+13:00

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.

New York congestion charging is back : 5 January 2025

2024-11-18T22:17:00.004+13:00

In May 2024 I wrote on how the Governor of New York, Kathy Hochul had suspended what was then called the Central Business District Tolling Program. It would have been the first proper congestion charge in the USA, in the sense that it applied a charge to driving on existing roads to manage demand, and generate revenue.

Hochul suspended it for multiple reasons, but a key one was to defer the risk of its introduction costing the Democratic Party support in the November Federal Election for the House of Representatives.

With that all over, and with the perceived risk that the forthcoming Trump Administration may cancel the program, it is all "go".

The New York scheme is now called the Congestion Relief Zone and it will be in operation on 5 January.

All of the equipment is in place, it is ready to go, and with the passage of the Federal election, the Congestion Relief Zone in New York will go live on 5 January. It was suspended in June, purportedly for policy reasons, but primarily a mix of concern over lawsuits and the effect the charge would have had on the elections to the House of Representatives.

The main change to the suspended scheme is a reduction in the peak time price from US$15 to US$9.

It's not clear whether the daytime period remains as previously proposed (0500-2100 weekdays and 0900-2100 weekends), but it is clear that the daytime charges will range from US$4.50 for motorcycles, US$9 for cars and up to US$21.60 for large trucks and sightseeing buses. Commuter buses will be exempt.

A per-trip surcharge of US$0.75 applies to taxis and black cars, and US$1.50 for app-placed trips (e.g. Uber).

The off-peak discount is apparently 75%, explicitly to encourage off-peak truck deliveries. Albeit, the case for having any charges between 2200 and 0500 appears to be low.

The price will not increase until 2028 when it can be raised to US$12 for cars (with proportion increases for other vehicle classes) through to 2030.

The charge is expected to enable borrowing of around US$15b in bonds to support the capital program of the New York MTA including:

· Second Avenue Subway Phase 2 extension to East Harlem

· Replacing signaling on 6 lines

· Improving accessibility at 20 stations

· New electric buses

A range of other projects are listed, including renovating parks and greenspaces.

The scheme is forecast to reduce VMT in Manhattan by 5% and a 10% reduction in the number of vehicles entering lower Manhattan. The charge is also being accompanied by other measures to reduce congestion including:

· Expanding enforcement of intersection blocking also known as “blocking the box” violations

· Expanding use of weigh-in-motion technology to enforce weight limits of trucks

· Raising threshold value for removing abandoned vehicles

· Permitting the City to impose surcharges on permits for construction that remove traffic lanes.

What next?

New York has around six weeks before the Congestion Relief Zone comes into effect, but there is a lot to do. A campaign to inform motorists of the coming zone will be critical, and it will be essential for as many as possible to be informed of what they need to do to be compliant with it. As a majority of vehicles entering lower Manhattan already have toll tag accounts for the multiple New York and New Jersey toll roads and crossings (Lincoln and Holland Tunnels carry the traffic from New Jersey and both are tolled), this should be easy for them. The real cost will come from the tens of thousands of occasional visitors, particular from the remainder of Manhattan which don’t have toll tag accounts.

Eyes will be on the impacts of the charge, the capacity of the bus, subway and rail networks to handle increases in demand, and the profile of demand on the road network, but I suspect the greatest impact will be in reducing frequency of trips. Irregular travel will reduce. There will be modest modal shift, but the real impact will be shifting of some commercial demand to the off-peak period and reduction in trip frequencies.

The press release from the Governor claims motorists will "save" US$1500 per annum, but this is comparing the price schedule now to the one previously proposed. It is being sold as being an improvement by being lower price, but it is still a new charge for driving into lower Manhattan. This press release covers the positive comments from multiple state and city politicians supportive of the plan.

A lot of the details have not been announced, but I expect most of what was previously announced will continue. These details will need to be confirmed in the coming weeks, but all going well, the New Year will see New York as the next city globally to introduce congestion charging, and the first in the USA.

Yes its primary focus is in raising money, it would not be happening if the pressure to raise revenue to fund public transport renewals and improvements were not so high, and it is a blunt scheme that will not do much to change time of travel.

As I wrote before, it almost certainly is not a model for the rest of the US to follow, but the principle should hopefully be a success. It should reduce congestion, it should raise a lot of money and enable the city to operate more efficiently. Let's hope it proves to be a great success.

New Zealand aims to shift all vehicles onto road user charges

2024-08-30T15:49:00.002+12:00

Yesterday, 29 August 2024, the New Zealand Minister of Transport, the Hon. Simeon Brown, outlined the Government's ambitions on revenue policy (distinct from policy on time-of-use/congestion pricing).

RUC for all vehicles

The "Revenue Action Plan" has several elements, but by far the most ambitious step is to transition away from fuel tax toward distance-based road user charges (RUC) by "as early as" 2027. The objectives of this is fairness as seen in this statement:

Transitioning to RUC will ensure that all road users are contributing fairly to the upkeep of our roads, regardless of the vehicle they drive.

Note that NZ has had a RUC system since 1978 which applies to all heavy vehicles (vehicles over 3.5 tonnes) regardless of fuel (although electric heavy vehicles have an exemption which expires in 2025), and all vehicles powered by a fuel not subject to excise tax. That means all light diesel vehicles, and since earlier this year includes EVs and plug-in hybrids.

The transition to all vehicles being on RUC means battery-electric hybrids and petrol (gasoline) powered light vehicles (and the handful on natural gas).

RUC in New Zealand currently has the following numbers of vehicles:

176,000 heavy vehicles
885,000 light diesel vehicles
103,000 light EVs and PHEVs

Note there is no excise tax on diesel in NZ.

NZ has the world's largest light RUC system today, and will be extending it to another 3.7 million vehicles. For most vehicles paying RUC, their owners buy prepaid licences in blocks of 1,000s of km based on vehicle class, with paper licences posted following online purchases (there are also options to buy "over-the-counter"). Some commercial vehicle owners paying for telematics services from three certified service providers are charged RUC through those service providers, which supply on-board units using GNSS and mobile data technology to measure and report travel, and calculate RUC to be prepaid almost "just in time". Around half of heavy vehicle RUC revenue is generated through these providers.

Other heavy vehicles are required to have hubodometers installed (including all trailers) and have paper licences issued, and light vehicle owners have odometers as the distance reference.

It is fairly clear that there will some challenges in the coming months and years in scaling up and reforming NZ's RUC system to accommodate a significant growth in vehicle numbers.

Of course Iceland also announced it was shifting all vehicles onto RUC by 2025, although it is unclear where that programme is at yet. However, if NZ does this, it will be the largest country to have shifted all vehicles onto RUC and, as it appears, to have abolished fuel excise duty.

Toll

Other parts of the revenue plan include expanding the scope for tolling, with the presumption that all new major roads would be tolled. The announcement included that three roads currently under construction or approved would be considered for tolling namely:

Takitimu North Link
Manawatu Gorge replacement (Te Ahu a Turanga) and
Otaki to north of Levin highway

All three of these routes are dual-carriageway/expressway standard roads so will be practical to toll, albeit modelling will need to determine the revenue vs. costs. All will have alternative inferior routes available, so motorists will be expected to pay a premium for the significantly improved routes. It will be interesting to see what proportion of capital costs of these projects will be recoverable from tolls.

Other measures

The announcement also noted that value capture would be unlocked as a tool to raise revenue from the likes of property owners directly obtaining uplifts in property values from spending on large transport projects. "Better use of existing funding tools" would also be part of the plan.

Big step forward

With the recent announcement enabling time-of-use road pricing (congestion pricing) and this announcement, this places NZ at the forefront, globally, in advancing road pricing. As some jurisdictions (Iceland, Netherlands and US states) are advancing RUC for part of their fleet, NZ is about to embark on a major step towards covering all of its fleet. While progress on urban road pricing on existing roads remains slow elsewhere, NZ may be ahead of most cities if one or two cities introduce pricing in the next few years. NZ will certainly be far ahead of any other car-oriented low density countries in advancing road pricing in some form.

Responding to Simon Wilson of the NZ Herald on Auckland congestion pricing

2024-08-20T15:44:00.015+12:00

First a warning. I don't use this blog as a place for debate or polemics, but on this occasion, I have decided to respond to an article which is quite damning, as an example of the sort of debate one endures around the topic of road pricing. This article is by no means the worst I've ever seen, but it is full of assertions with little to no evidence, mistakes and bold claims that appear to be more motivated by a desire to undermine the policy itself (and perhaps this is because it is from a government he himself does not support), than to critically review the merits of it.

The NZ Herald is Auckland’s (New Zealand) newspaper of record. Simon Wilson (no relation) is the NZ Herald’s senior writer on transport issues. Given the NZ Government’s recent announcement of its intention to advance congestion pricing (called time of use pricing), he has written a column on the topic, which is arguably a polemic of weak argument against it. Note it is behind a paywall. I am a subscriber, but it is not worth you paying to read his article though.

It is possible to critique time of use pricing in Auckland on some grounds, such as whether it could be expanded at reasonable cost sufficiently to significantly address congestion, or whether net revenues should be redistributed through tax cuts rather than spending on infrastructure, or if it is better to introduce road pricing more generally, so driving outside congested time and locations is cheaper. It is possible to argue that there should be more and better public transport to accompany road pricing, or that it could cause government to delay or cancel some new road projects, but none of that is apparent.

I’ve spent over 20 years working on road pricing policy around the world and I have seen arguments against road pricing from a range of perspectives. Some on the right see it as an additional tax that intends to limit motorists’ freedom and increases the power of the state against them or is used to invade their privacy through "tracking". Some on the left see it as unfair that a scarce resource (road space) is allocated on the basis of price rather than queuing. Wilson is on the left.

Simon Wilson has written many columns in the past about the importance of tackling climate change, of getting more people out of their cars and into public transport or active modes. He is a fervent believer in behaviour change in urban transport policy. Now he is making himself perhaps the highest profile campaigner against the one policy that could achieve more of what he claims to want than any other – more efficient road pricing.

He titles his article “Sorry Simeon Brown, congestion charges are not the key to freeing up the roads”.

He’s wrong. I doubt Wilson can identify a city in the world that has freed up its roads without road pricing, he certainly doesn’t name any. Short of Pyongyang (or Covid lockdowns), I don’t know of any major city in the world without road pricing that has significantly reduced congestion, although certainly some that have it do still have severe congestion (notably London). Singapore and Gothenburg certainly have much less congestion than before either city had congestion pricing, Stockholm has much lower congestion approaching its central city and along its main bypass route (although there remains congestion elsewhere in its network). Milan still has bad congestion, although it is better with pricing. Wilson does not indicate which cities on a scale of Auckland have freed up their roads without either road pricing or depopulation

So what else did he have to say?

He repeatedly asserts that time-of-use pricing, congestion charging etc is a “tax”, which presumably he is saying for pejorative impact to appeal to readers on the right of politics (new taxes are "bad" from a traditional rightwing perspective). Whether or not it is a tax would be a legislative matter. I’m not sure if he thinks water meters are a “tax” or electricity meters, but applying a price, that varies by time-of-day, and is periodically reviewed as to user demand (as in Singapore), is not very much like a tax. In Sweden, congestion pricing is called the “congestion tax” for legal reasons, in Singapore the term “Electronic Road Pricing” is used to describe simply a fee for using the roads. Does he see bus fares as a tax? Does he see the existing toll roads in NZ as a tax? This is hardly a major point, but it sets the tone for this article, which is a not particularly coherent piece, sometimes opposing road pricing and in one place saying "it has a role".

Although he admits that congestion pricing works, he then makes several claims that do not stand up to scrutiny, namely:

• They can “do a lot of harm”;

• They are “not the key to reducing congestion”.

He also says they are not popular, which is hardly a surprise, as reports from The Congestion Question (the last major study into the topic from 2016-2020) indicated that public acceptability is the greatest challenge to implementing congestion pricing. Wilson’s column is of course helping to add to this challenge. I don't think you should complain about something being unpopular by contributing to its unpopularity sans the merits.

What about "do a lot of harm”? He doesn’t elaborate, and in fact provides zero evidence of a "lot of harm" anywhere, so why say it? Why scaremonger?

He then acknowledges that for commercial traffic, congestion is a cost, whether for freight delivery or simply providing services that require getting between sites. However, he then describes Stockholm, London and Singapore as all being cordon schemes, which isn’t quite accurate. Although he cites The Congestion Question report, he clearly did not read the report on international experience (PDF) (disclaimer: I wrote that with colleagues of mine).

Let's be clear, Singapore is predominantly a corridor scheme (with two small cordons), with most charging points on major roads and arterial routes approaching the downtown. Stockholm is a cordon (PDF), but also now has a corridor charge for the Essingeleden motorway that passes through the city. London is strictly an area charge (it charges circulation within the cordon as well as crossing it).

Wilson mentions this because he prefers cordons it seems but sees corridor charging (which the Mayor of Auckland did propose last year) as being flawed because they are easy to avoid by rat-running on local roads. That’s true, if you don’t put in place measures to price that rat-running (e.g. by pricing exiting and then re-entering a road to avoid a priced point).

This appears to be a very weak attempt to condemn road pricing schemes that aren't cordons, but the Government's policy is not that there should not be cordons, or that there should be any specific type of congestion pricing scheme at all.

Of course, there has been no decision at all about what proposal to introduce in Auckland, but the Congestion Question did recommend a downtown cordon supplemented by corridor charges, on the most congested routes on the Isthmus and towards the North Shore first. More work has to be done on what the first scheme would look like. So it seems rather premature to be antagonistic to the very concept as a whole at this stage.

The Congestion Question indicative downtown cordon

His next point is to appear to be critical of the timeframe, as he claims the first scheme would not be in place until 2028. This seems pessimistic. Sure the legislation and approvals will not be finished until 2025, but it is entirely plausible for a scheme to be operational within two years of that. He indicates that the timing of elections (local in 2025, national in 2026) is driving this, but it’s unclear that this could be accelerated to be significantly faster. He says it should be operational when the City Rail Link opens, which I agree, but it seems unlikely that even if approved today, that a scheme could be operational in 18 months. Yet surely if that is the best time, the second best time is as soon as possible afterwards?

Then Wilson goes back to how unpopular it would be. He claims it is a “regressive tax”, yet I don’t recall him calling the introduction of the Auckland Regional Fuel Tax that, even though there is a study that explicitly concluded that (PDF). The fuel tax applied 12.5c/l on petrol and diesel sold in Auckland, and of course meant everyone driving paid it, except those able to afford an EV or hybrid vehicle. Wilson did support the regional fuel tax when it was introduced, and he said “It does hurt the poor disproportionately …. But it also targets almost everyone who's clogging up the roads”.

That’s nonsense. It targeted nobody. He also said “one day we’ll have better ways to manage demand” saying essentially road pricing would be that but “we don't have the technology in place to do that yet and it's controversial”. The regional fuel tax was not introduced as a demand management tool, but moreover the technology to do road pricing exists now.

Now the government is now advancing it, and he opposes it, not because of the unavailability of technology. Of course the regional fuel tax is now history, but that measure improving the cost of living for most Aucklanders is unnoticed, because this is a polemic.

He gives no evidence for road pricing being particularly regressive, although as a concept it is no more “regressive” than pricing water, electricity or indeed public transport or food. As part of developing proposals for Ministerial approval, an impact analysis of the proposed “time of use” pricing scheme will need to be undertaken. Perhaps Wilson could focus on what that analysis should look like, rather than dismissing the whole idea of pricing as regressive. Now the Gothenburg congestion tax IS regressive, there is evidence of this (PDF), but it was a scheme set up to raise revenue and is far larger in scope than the scheme that would have been needed to relieve congestion. The NZ Government is proposing time of use pricing specifically to improve network productivity, not to raise revenue, but Wilson ignores that, as it doesn't fit his polemic. Of course congestion is regressive, as the richest don't commute at peak times or can buy homes close to work.

He claims “It’s not the key to solving congestion. And one of the most common arguments for it is economic gibberish”. This is rather embarrassing. If you don’t understand an economic argument then the best way of understanding it is not to call it gibberish, in fact it displays astonishing ignorance. His understanding of the value of time and the economic impacts of congestion is poor indeed.

He claims “These charges will be a cost of doing business that companies will pass on to their customers. For the general public, they will raise the cost of living”. Will they? Having claimed correctly that less congestion will make all sorts of businesses more productive, whether it be for freight deliveries or services such as the building trades, they will be able to undertake more jobs for the same cost (wasting less time and fuel). Pretty much all benefit/cost analysis indicates businesses save much more than congestion pricing costs, so it would not be passed onto customers. Of course congestion costs are passed on.

It's his next claim that is the most embarrassing.

Alan McDonald from the Employers and Manufacturers Association (EMA) has said much the same. “Recent traffic monitoring data has found that Aucklanders are losing 22 million hours per year out of their lives while they sit in traffic,” he declared. “That equates to a $1.3 billion annual hit to GPD.”

Gibberish. You can’t link private travel to productivity because very few people drive to work on company time. However long your commute takes, it’s your own time you’re wasting.

Everyone resents it, and fair enough. But the economic value – the “annual hit to the GDP” – is zero.

Wilson claims that the economic cost of congestion to private individuals is zero. He claims this doesn’t impact on GDP. Let’s set aside the obvious social cost. Congestion means commuters leave home earlier and get home later than they would otherwise. That’s less time with family, less personal time, less time to cook, to exercise, to sleep even. Wilson understands what externalities are, I think, so he could at least acknowledge that. However, what he misses out is what congestion does to opportunities for individuals.

You see the available job pool for most people is directly related to the duration of commute from wherever they live to wherever jobs are located. Most people are happy to commute for up to half an hour, and many in a larger city for up to an hour, although those with children to look after are more challenged. Beyond an hour those able to spare that amount to time to travel to and from work are much more limited in number. In short, congestion reduces the opportunities people have to increase their incomes with better employment, and it also reduces the labour pool available to employers to improve their productivity. I’m always a little sceptical of the methodologies used to “cost” congestion, but to dismiss traffic congestion as not imposing costs on GDP as it applies to private individuals is ignorant. There is literature to back this up.

Wilson then determines that the answer isn’t road pricing, but more rapid transit. Yet he doesn’t seem to be able to explain why cities like Paris, Amsterdam, Tokyo, New York, Sydney or San Francisco all have chronic congestion WITH lots of rapid transit? The Northern Busway is a great piece of infrastructure, but it hasn’t fixed congestion on the Northern Motorway, although it has absorbed a lot of demand growth. Buses do carry a lot of people over the Auckland Harbour Bridge, but the idea that this is a substitute for road pricing is simply absurd. He may as well say that you don’t need parking fees if there are free buses. It’s completely false to equate the impacts of the Congestion Question, which was a network wide reduction in congestion, from the effects of the Busway on one corridor. He claims rapid transit reduces emissions. This only happens if it enables modal shift from driving cars, which of course congestion pricing promotes as well (bearing in mind transport emission in NZ are capped with the Emissions Trading Scheme anyway).

The article explains all of the benefits from a lot of public transport, without even really noting that the costs of all of this infrastructure he wants need to be paid for, and one way of doing it would be through congestion pricing. That doesn’t mean I think that’s how the money should be spent, but surely that connection could be made? Furthermore, all of the rapid transit he touts does absolutely nothing for freight or tradies or other commercial traffic, as they can’t use it.

He then makes this remarkable failure to connect thoughts:

Our roads are appallingly congested, we are failing to reduce carbon emissions and our road safety record is among the worst in the developed world. The opportunity is for a rethink about how and why we use the roads, so we can build ourselves a more functional, friendlier city. Instead, the Government proposes a new tax.

He claims “a great many people will not be able to avoid a congestion tax”. How does he know? If it is a downtown cordon, where only 13% of employment is based and half of commuters already travel by public transport or active modes then hardly anyone will be affected. Even if it is just the Mayor’s two corridors, that wont affect most commuters either. Again, this is just nonsense.

If Simon Wilson can’t see the link between road pricing, reducing congestion and emissions, and making a city more functional and friendly, then he is either ignorant or deliberately disingenuous. I fear he is simply a polemicist seeking a headline and he can’t give any credit to a politician he doesn’t like or support for implementing a policy that does more for what he wants than any other single measure at the lowest cost.

Opposing the very concept of time-of-use road pricing at this critical stage indicates he is not really interested in enabling all of the potential tools to reduce congestion, lower demand for emissions and encourage modal shift at all, but rather is just writing polemics for headlines.

Wilson would be better placed to focus not on opposing the first government in NZ’s history to advance road pricing to implementation, but rather to focus on the design of the first scheme proposal for Auckland, to ensure it has a positive impact on reducing congestion, minimal impact on those with low incomes and limited choice, and to encourage creative solutions, such as those used elsewhere, to address any issues. If he wants a cordon, then talk about it. If he wants a different option, then fine. However, if he doesn’t know anything much about the topic at all, he might prefer to read a bit more, talk to people who do and not try to undermine a policy that actually has general support across the political spectrum from the Greens on the hard-left to ACT on the classically-liberal right.

Time-of-use pricing could help Auckland look much more like what Simon Wilson wants it to, it’s just a shame he wants to get in its way, on grounds that are spurious and almost entirely baseless.

The Congestion Question evaluation of impacts

New Zealand Government to introduce legislation to enable congestion pricing: Part One - Summary

2024-08-19T20:35:00.002+12:00

Auckland - the Congestion Question general depiction of locations for congestion pricing

As US advocates for road pricing mourn that New York has, once again, seen congestion charging stall, it is New Zealand (NZ) which is showing a path towards implementing that most difficult of types of road pricing. On 12 August the Hon. Simeon Brown, Minister of Transport for NZ announced the NZ Government’s policy for implementing “time of use” road pricing (congestion pricing) (TOUP is my acronym), including that it would introduce legislation to enable TOUP later this year. TOUP will be led by the NZ Transport Agency (NZTA), the central government agency which is the state highway road manager, the manager of the land transport funding system and manager of the motor vehicle register and road user charging (RUC) system.

As a unicameral Parliamentary democracy, with the governing coalition having a majority in its Parliament, passage of legislation should not be a problem, although the legislative process will provide ample opportunity for input and submissions from the public. It is almost certain this will pass into law, and NZ will have enabled the introduction of TOUP on a case by case basis.

In summary, the process will see NZTA work with local authorities that express interest in introducing TOUP to develop proposals for approval by the Minister of Transport for introduction. Those proposals must fit a series of criteria, and be focused on reducing congestion and will be developed as a partnership between the two levels of government. The overwhelming emphasis is on developing TOUP proposals that can gain public acceptance. In short, NZ does not want the scenario seen in the UK whereby local authorities develop proposals in isolation which are focused on raising revenue or restricting traffic for the sake of public amenity, but to have a joint central/local government approach to making the road network be more productive.

All going well, with legislation enacted in 2025, it is possible that the first TOUP scheme will be operating in NZ in 2027 or 2028 in Auckland.

More details are in this background document here (PDF), but below is a summary.

Background

As I wrote previously, the change of Government in New Zealand has seen adoption of explicitly pro-road pricing policies, including support for congestion pricing, which it has called “time of use” pricing or charging.

This is largely driven by congestion in the country’s largest city, Auckland, with five studies in the past twenty years all supporting the introduction of some form of road pricing in the city. However, the policy is not just about Auckland, but about any city which can demonstrate a case for congestion pricing. There is a case for it in Wellington and Tauranga, given congestion in those cities due in large part because of trip patterns on a constrained road network.

The history of time of use pricing in New Zealand goes back to the Helen Clark led Labour Government of 1999-2008, which initiated the first major study into road pricing in Auckland (summary here). This did not result in implementation, largely because of a strong political belief that major transport projects in Auckland needed completing first before the public would accept road pricing. This include key projects upgrading and extending the motorway network (notably SH20 and SH18 to provide the “Western Ring Route” as a bypass to the Auckland Harbour Bridge and the central motorway junction), the Northern Busway and modernisation, expansion and electrification of the city’s commuter rail network. These projects have all been completed, with two more busways and an underground inner city rail loop under construction as well now.

However, interest in road pricing did not end when the Clark Government lost the 2008 election, as studies continued under the John Key/Bill English led National Government of 2008-2017, and under the Jacinda Ardern/Chris Hipkins led Labour Government of 2017-2023. Yet it is the Chris Luxon led National Government that looks likely to finally implement it.

It is NOT a model of enabling local authorities to implement schemes, but rather a partnership approach whereby central and local government work together to develop and implement road pricing.

Key points

Time of Use Pricing is to be introduced to improve traffic flow and shorten journey times. It is not to be introduced as a revenue measure, although net revenues will be generated by it.
Legislation is to be introduced to create an enabling framework for road controlling authorities to work with the NZTA to develop TOUP proposals for approval by the Minister. NZTA itself, as a road controlling authority for state highways, can generate its own TOUP proposal for part of its network.
TOUP proposals will need to be consulted with local stakeholders and the community.
TOUP proposals must include impact analysis on traffic and local businesses, as well as the community.
TOUP proposal design will be led by the NZTA, working with relevant local authorities. This will form a TOUP partnership which will lead the consultation of the scheme.
Scheme development, design and implementation costs must be fully recovered from future revenues. Government funding will not be made available for TOUP schemes on the basis that they should at least pay for themselves.
Net revenues must be spent on the transport system in the region where money is raised and will supplement not replace existing funding sources. Decisions on the precise projects or activities to be funded will be made by the local authority members of the partnership and the Minister of Transport.
Authority to implement a scheme will be granted by the Minister of Transport through Order in Council. The Order in Council will include details about where and when the scheme will operate, and how much it will charge users.
There will be flexibility in the Order in Council to vary charges and the geography of the scheme within defined boundaries. The illustration below demonstrates this.
The "scheme area" will be determined by Order in Council, but the first scheme implementation could be a small cordon within it, or a single route, and the TOUP partnership would have flexibility to progressively expand (or contract) the geographic scope without seeking new approval.

Flexibility within New Zealand congestion pricing scheme proposals

TOUP schemes will be required to regularly monitor their performance, specifically impacts on traffic volumes, travel times on priced roads and the wider network, revenue raised and how it has been used as well.
The Secretary of Transport (head of the Ministry of Transport) will be responsible for scheme oversight including whether the scheme is meeting its objectives and complying with the relevant Order in Council
If the TOUP partnership wishes to change elements of the scheme outside the Order in Council, it will need to engage in public consultation and seek an amended Order in Council from the Minister of Transport.
The policy is technology neutral, although it is expected the first schemes will be using ANPR-based technology as detection and/or declaration based schemes, likely using the NZTA's tolling system back office.

Process of application

The full process for approval of TOUP schemes is depicted below:

New Zealand Time of Use Road Pricing approvals process

What's next?

As the legislation is to be drafted and policy developed, the Ministry of Transport and NZTA will be focused on this in coming months. Meanwhile, it is widely known that Auckland Transport has already procured services from a consulting consortium to help it design and develop a TOUP scheme that it wishes to seek appropriate, and it is unclear how that work will proceed under this framework. It seems likely that the scope and timing will be curtailed somewhat, as any scheme needs to be developed in partnership with NZTA, and Auckland Transport will not want to risk spending too much money on scheme development if it doesn't have the consent or approval of NZTA.

The next major step will be the publishing of draft legislation and its introduction into the NZ House of Representatives later in the year, after which it will be sent to the Committee stage for public consultation.

Comment

The NZ Government has taken a prudent approach to the development of TOUP given that the world has no shortage of congestion pricing schemes that have failed to proceed due to public backlash. It is appropriate for both central and local government to work together closely, as the UK experience of local government led congestion pricing schemes is largely woeful. There are far more cities that have advanced and seen proposals be cancelled, than advanced, and that is in no small part to local authorities appearing to be unable to develop schemes that bring the public on board. See Cambridge as the latest example.

NZ is going to probably have two cities at best implementing TOUP before 2030, and perhaps one or two more after that. It needs to get it right, and with a small population (5.1m) it should rally the resources of both levels of government to enable it to be done in a way that obtains public support. NZ has the world's highest per capita car ownership, so it is critical that it introduce urban road pricing in a way that delivers value for those who pay, without frightening those not affected, and it actually reduces congestion.

This is why NZ sees Singapore, notwithstanding enormous differences in urban form and travel patterns, as the best case study for congestion pricing today. It is the ONLY system that regularly reviews and changes prices both up AND down based on network performance. No other system is that sophisticated or flexible. NZ could do worse than emulate the policies seen in Singapore.

NEXT: The Cabinet Paper for Time of Use road pricing contains a lot of analysis and consideration of options for this policy, I'll summarise this.

"Motorists First" - Findings of the Independent Toll Review for the NSW Government - Part Three: The Recommendations

2024-07-29T18:05:00.003+12:00

Given the findings of the Independent Review, and particularly the highly controversial Interim Report (which essentially called for the NSW Government to legislatively override existing toll concession agreements, causing heart attacks at Transurban and among its investors), the recommendations to finally come out of this review are critical. However, equally critical is what, if anything, the NSW Government is going to do in response.

It's worth noting the wealth of data and research compiled in this review, which should help inform discussion and debate about tolling in Sydney for some time.

42 recommendations were made, and I wont repeat them all in detail here.

However, a key part of the review work was to model the impacts of models of reform that were presented. It's critical to understand that the report recommends "moving towards" the Network Toll Restructure and Reduction model, not necessarily the details of that model exactly, but does not recommend the Network Toll Restructure Model. Therefore, I will focus on the former.

These models are:

• Network Toll Restructure model: Introduction of standardised network tolls and including application of two-way tolling; and

• Network Toll Restructure and Reduction model: This uses revenues generated from two-way tolling, peak pricing and other sources to reduce tolls where appropriate. A declining distance approach with fixed infrastructure charges is proposed.

The effect of the latter was modelled as meaning:

• 78% of motorists are the same or better off, 17% would pay $3 + more per trip.

• Main losers are those using the Sydney Harbour Crossings

• Western Sydney motorists get some relief as longer trips are reduced in cost

The following table lists the current tolls in Sydney (all in Australian Dollars ~ US$0.66-A$1.00:

As you can see the basis for tolling varies between being two-way or one-way, fixed or distance-based, with rates for different classes of vehicles varying considerably between toll roads, and the basis for adjusting tolls varying as well.

The proposed new structure is as follows:

This is for Class A vehicles only for simplicity in illustration, but would have a consistent toll distance rate, with infrastructure rates that reflect fixed costs for those roads. The declining percentage means that every 4km the per/km distance rate declines 15%. The effect is to make some shorter journeys more expensive, and almost all longer ones cheaper.

The following table indicates what the modelling of the Tolling Review suggests would be the distribution by trip distance of the "winners" and "losers" of reform. All those travelling longer distances would be better or no worse off, whilst about 40% of shorter (<10 km) toll road trips would be more expensive.

The difference in average toll for a car would be to reduce from $9.02 today to $5.43, a drop of 40%. The effects on the network are seen in the following map, depicting traffic increases and decreases on the tolled and untolled network. It would increase traffic on the M2, M4, M5 east and south west and M7, as well as River Road, Victoria Road and James Ruse Drive (as traffic either avoids the northbound Harbour Crossing tolls or queues to use the M4 more intensely).

It's striking that the obvious impacts on reducing traffic are on the Harbour Crossings and Eastern Distributor, as introducing northbound tolls on the Harbour Crossings and southbound on the Eastern Distributor sees some redistribution of traffic to the west, primarily on the untolled crossing at Iron Cove Bridge and Gladesville. There is also reduction on some streets in the CBD and some parallel routes to the M5, as lower tolls make some toll roads more attractive that local streets for some drivers. The M4 and M5 in particular see much higher traffic volumes. It's unclear the impact on congestion overall, as this did not include any peak/off-peak pricing on a network basis.

This table produced with the press release accompanying the Independent Toll Review (PDF) illustrates the effects on some toll trips:

The Toll Restructure and Reduction scenario has significant impacts on all of these examples, notably halving the cost to drive from Campbelltown to the CBD, but more than doubling the price from North Sydney to the airport.

Before summarising the other recommendations, it is worth going over in some detail the proposed tolling principles (the first set of recommendations).

Tolling principles

These principles are recommended to guide policy measures to reform tolling of existing roads and should inform the implementation of tolling on new roads.

The Tolling Review considered the set of tolling principles agreed in 2014 which were as follows:

1. New tolls are applied only where users receive a direct benefit.

2. Tolls can continue while they provide broader network benefits or fund ongoing costs.

3. Distance-based tolling for all new motorways.

4. Tolls charged for both directions of travel on all motorways.

5. Tolls charged reflect the cost of delivering the motorway network.

6. Tolls take account of increases in expenses, income and comparable toll roads.

7. Tolls will be applied consistently across different motorways, to the extent practicable, taking into account existing concessions and tolls.

8. Truck tolls at least three times higher than car tolls.

9. Regulations could be used so trucks use new motorway segments.

10. Untolled alternative arterial roads remain available for customers.

The review found that these were rather general and didn’t include some key issues, such as the proportion of costs that should be recovered from tolls relative to taxpayer funds. There was little recognition of the need for tolls to vary by time of day, plus although some of the principles (tolling in both directions) are valid, they were not always applied (see the Harbour Crossings and Eastern Distributor).

The review proposed a set of modified principles with one set about the level and structure of tolls and another on consistency with competition policy.

Proposed New Tolling Principles

On the level and structure of tolls:

• Toll setting should be guided by the objectives of efficiency, fairness, simplicity and transparency.

• Tolls should have regard to the costs associated with the provision of toll road services as well as benefits. Declining distance-based tolls are consistent with the principle and have efficiency and equity advantages over fixed distance-based tolls or variable zonal distance-based tolls.

• In general, it is appropriate that beneficiaries pay for toll roads, for example, where benefits flow to the broader community then government contributions are appropriate. The extent of cost recovery achieved through tolls should reflect the extent to which a toll road’s benefits are enjoyed directly by motorists.

• The process for setting tolls should be transparent to the public to promote understanding and allow for informed comment.

• The methodology for determining tolls should, so far as possible, be applied consistently across the entire network.

• Tolls should allow toll road operators to recover their costs incurred in financing the construction of the toll road including an appropriate (i.e. risk adjusted) return, and efficient operating and maintenance costs where relevant. It may be appropriate to apply specific charges to individual parts of the network to allow for cost recovery, for example infrastructure charges to cover the additional costs associated with constructing tunnels or bridges.

• Tolls should not be set at a level which would allow excessive, monopoly profits, or inefficient cost levels to prevail over time.

• Maintaining flexibility to adjust tolls over time in response to demand and supply changes is important.

• Toll setting should take into account fairness as well as efficiency considerations, bearing in mind that other more direct policy approaches may be preferable forms of intervention in relation to fairness.

• The different vehicle categories for tolls should balance impactor pays (the extent to which vehicles impose costs on the network and other users due to their weight and size set against the costs imposed by such vehicles on ancillary roads) and beneficiary pays considerations (a higher willingness to pay for travel time savings). For example, under this principle setting higher tolls for heavier and larger vehicles is consistent with efficient tolling.

• The structure of tolls should be simple enough to be readily understood by users and avoid creating perverse incentives for the use of the road network. Inconsistent approaches to the tolling of toll roads can cause distortions to traffic flows.

• Tolling information should be communicated in real time to inform customer journeys and enable improved decision-making.

On consistency with competition policy:

• Competitive pressure should be harnessed when setting tolls and assessing concessionaire bids (competition for the market) and when regularly reviewing tolls (competition in the market). Bidding for concessions should focus on ensuring tolls are set at competitive levels.

• Unsolicited proposals for toll road extensions should not be considered in isolation of the possibility of first modifying tolls to better manage traffic flows.

• Restrictions should not be imposed on the use of any road or public transport in order to enhance the financial viability of a toll road.

• Tolls should only apply where motorists have reasonable and effective untolled road options, including arterial roads, or public transport alternatives, except where community benefit may necessitate restriction on access to alternatives.

Other recommendations

Moving to network tolling: The core recommendation is to change the current ad-hoc setting of tolls by individual concession (and the State), to a more coherent and consistent approach. The key recommendation is to have declining distance-based tolls, so that the first two kilometres are charged at a higher rate than the next two and so on. This is for fairness, but also efficiency to recognise the cost imposed on other users of using toll roads for shorter trips, and disrupting traffic flow. Network tolling should mean some reductions in tolls, through measures like implementing two-way tolls on one-way toll roads, and more use of peak tolling to lower tolls off-peak. Moving to network tolling should help with steps to phase out or reform toll relief, and how to progress this over time. Other options to lower tolls includes extending toll concessions.

Using pricing to influence demand: Going beyond tolling as an infrastructure cost recovery measure, is to use peak and off-peak pricing, with an initial focus on trialling peak pricing for the freight sector. This is both to reduce congestion at peak times, and to encourage better use of spare capacity off-peak. Included in this recommendation is dynamic pricing, which by the conventional definition is not a good idea in this context (although reviewing peak/off-peak pricing more frequently than annually IS a good idea).

Updating vehicle classifications and charges: Having uniform classifiers and consistent multipliers for heavy vehicles are the key recommendations, along with exempting public bus services from all (not just some) toll roads.

Expanding toll coverage: Applying two-way tolling on the Sydney Harbour Crossings and Eastern Distributor is the obvious step (and one that has generated understandable controversy in isolation). More strategically, the review recommended evaluating the entire motorway network to see if untolled sections should be tolled (reducing tolls on other sections) or if tolls should be removed from some sections. It seems likely that this will be difficult to sell politically.

Initial assessment of toll reforms: Implementation of the reforms should be carefully monitored with frequent modelling to ensure results meet policy objectives.

NSW Motorways: The review recommended establishing a new entity called NSW Motorways, intended to strengthen governance and accountability over NSW toll roads in order to improve outcomes and transparency for motorists. It would work with concessionaires to set network tolls and adjust them working with concessionaires. It would take over the E-Toll retailing business of Transport for New South Wales and have a focus on innovating to improve the tolling experience in the state. It could also manage future toll roads and contract managers for those toll roads, and bring existing public toll roads within its operations.

Concessionaire negotiations: The Review recommends that the Government negotiate with concessionaires to implement network tolling by the end of 2024 and if not achieved, use legislation to advance it. This raises obvious concerns about legislating over the contracts the state has with concessionaires.

Independent oversight of toll setting: The Independent Pricing and Regulatory Tribunal (which is already price regulator for water, public transport and local government services) should also have oversight for toll rate setting. It should work with NSW Motorways and Transport for New South Wales to monitor prices, including the financial and traffic impacts of network tolling, toll relief schemes, the need for and operation of time-of-day pricing and concessionaire performance.

Legislative package for toll setting: Essentially a recommendation to legislate over concession agreements if necessary to implement network tolls. This should include a Revenue Adjustment Mechanism so revenues can be “appropriately” shared.

Competition measures: These recommendations seek more competition in future concessions and a long-term view on competition with procurement of future toll roads. Concession periods should be set based on public interest considerations, including competition. Competitive tendering should be favoured over unsolicited proposals. Roaming fees (across retail toll providers) should be regulated.

Transparency for motorists: Motorists should be able to see past and projected future toll road spending. More information should be provided for trip-planning online and via apps, as well as better signage to inform motorists of toll road prices before they make a decision on whether or not to use a toll road.

Tolling customer advocate: NSW Motorways should have a tolling customer advocate function to consider and manage customers complaints, influence improvements to systems, processes and legislation to minimise future complaints and improve compliance. It should manage awareness and education campaigns, address new “pain points” from the transition to network tolling, and publish reports on the implementation of toll reform. If a toll debt is disputed, debt recovery action should be suspended while the dispute is being addressed.

Industry ombudsman: Proposes that NSW, Victoria and Queensland require toll operators to belong to a statutorily approved independent dispute resolution scheme.

Toll notices: These should be simplified and modernised, calling them “invoices” and removing administration notices, but adding late payment fees to incentivise early payment. Information provided should be user-centric, informing them of the most common reasons for non-compliance (flat tag battery and number plate not linked to an account) so motorists can address such issues to avoid a repeat of unpaid tolls.

Debt recovery: Reform criminal enforcement so there is only one offence per trip and clearly identify if it applies to the driver or the registered vehicle. At present debt is owed by the vehicle’s owner, but it may be appropriate for that to be the driver in some cases. For civil debt recovery, find ways to improve the accuracy of contact information for registered vehicle owners. Noting that debt collection agencies seem to be able to find debtors easier that toll road operators. Toll road operators should develop and publish customer charters

My thoughts

This is a weighty report, and a lot of thought has gone into it. The reforms proposed might be categorised into three areas:

Rate setting/tolling policy
Business rules
Competition
Governance

The most fundamental part of the review is the recommendation to take a network approach, and to apply a declining distance based tariff with an infrastructure fee layered on top of it for the higher capital cost toll roads. There is merit in taking such an approach, albeit it is obvious the biggest challenge is doing this whilst ensuring concessionaires are not disadvantaged, and consent to the changes. The "sword of Damocles" of regulation may be there, but it is not one the NSW Government will want to enforce, as it is likely to make any future PPPs more expensive (as it would have an impact on investor confidence in contracting with the NSW Government).

Two-way tolls and having consistent vehicle classifications and multipliers all make economic sense, but it will be difficult to convince motorists that pay one-way on the Sydney Harbour Crossings that they should pay in both directions, without getting anything for it. Other than by halving existing tolls (so they are split by direction), which will likely exacerbate AM peak congestion, it seems unlikely that this will be able to be implemented due to public resistance, although if it were focused on managing demand (and moderating tolls for the Western Harbour Crossing) there might be more tolerance for it.

Certainly the distributional impacts of tolls in Sydney fall greatest on those in the West, so it is understandable why there is some emphasis in improving conditions for motorists there. I note that significant cutting tolls from Campbelltown to the CBD, a route which has a frequent commuter rail service, might have negative impacts on congestion if the modelling doesn't take into account the risk of modal shift from rail to driving, although the cost and availability of parking is a significant deterrent.

The biggest challenge is going to be getting agreement from Transurban to advance these proposals. This is only going to happen if it can be convinced it will be no worse off, not just today, but over the duration of each concession, because each concession has investors (Transurban does not own 100% of all of them) expecting consistent returns. The willingness to do this is likely to be limited, as it requires forecasting changes in demand for several decades out.

The proposal to enable peak/off-peak tolling is likely to have the greatest impact on congestion on the one-hand, and underutilised capacity on the other, noting that for concessionaires, underutilisation is not a problem but rather maximising yields. If there is a public policy reason to reduce tolls off-peak on some roads, to remove traffic from other roads, this may justify a subsidy, or better yet, justify peak pricing to offset it.

What all of this suggests is that the proposal to change governance, by creating NSW Motorways, to undertake the analysis and modelling needed to advance negotiations with Transurban, will be important. Assuming the NSW Government is not willing to regulate over concessions, it will need to be able to model the impacts of a range of pricing policy options on each individual concession, and to creatively identify options to ensure that public policy objectives are achievable (reducing congestion, better use of toll roads off-peak) alongside making sure concessionaires are willing, to commercially, to accept changes to their concession agreements. It is appropriate to set up NSW Motorways in any case, as a road regulator which applies to state toll roads (there are two more being built now on top of the two existing Sydney harbour crossings), and which could be extended to cover a future road user charge...

The Review does allude to the wider issue of how motor vehicles are charges for road use across the network in NSW, and the need for some form of road user charging for EVs. Ultimately, there may be scope for more direct user charging across all roads, but given the Vanderstock decision at the High Court of Australia, that looks likely to be led by the Commonwealth Government. At the very least, the NSW Government should be thinking strategically about tolling in that wider context. It is not that road user charging will replace tolling anytime soon, but if there is to be a shift towards distance based tolling across the board, it should not be inconsistent with applying some form of per kilometre charging for vehicles on all roads.

On the business rules side, the proposals around debt recovery, transparency for motorists and an industry ombudsman are all good from a consumer protection point of view. None of this should be particularly controversial.

Given the role of Allan Fels it should not surprise anyone that competition has been a focus of this review. The dominance of Transurban should give cause to seek to diversify the profile of future concessions, but the retention of retail competition is also important. Bear in mind the main competition for toll roads are the untolled roads (and for a small subset of users, public transport on some corridors), and although it is flawed, toll roads do have a form of price control over price increases (albeit it effectively means prices increase by inflation). However, competition can never really be addressed whilst other roads are priced so indirectly, through fuel tax and fixed charges like motor vehicle registration fees. Perhaps the most effective way of enabling competition for future toll roads is either for such roads to be state owned and concessions issued for operations, or for future concessions to have tolls set by independent regulation.

Finally, although the political will is hardly likely to exist for it, there is likely to be sense in at least considering implementing congestion pricing in the form of a CBD cordon in Sydney in parallel with such changes. Such a cordon could be used to moderate tolls as well as better manage congestion on traffic towards the CBD, but that was outside the scope of this review.

The response

The Government response so far is through this press release, which is not really a response as of yet. According to The Guardian, Transurban has said it wants to take a corridor based approach and does not approve of the full network approach. Roads Minister John Graham also suggested that taxpayers might pay concessionaires to implement some of the recommendations, which is a good idea, if it results in net benefits to consumers and the economy (noting that it could reduce the cost of existing toll relief schemes if tolls can be reduced for some customers).

The full response will not be clear for perhaps a few months, and it seems unlikely that all recommendations will be accepted. However, there is a strong case for more consistency in tolls across Sydney, and despite the unpopularity of two-way tolls for the harbour and peak tolling, the merits of being able to spread demand more efficiency are likely to be high.

What needs to be behind any reforms are consistent principles and objectives. Discouraging short trips on toll roads is likely to result in more efficient use of the network, declining distance based tolls makes sense up to a point, but the merits of high toll costs for long distance travel come from the signals they send for land use and modal choice.

There have been enough toll reviews in recent years, as my first post on this topic showed (and I was involved in one of them myself). I sincerely hope the NSW Government acts on much of what this one recommends.

"Motorists First" - Findings of the Independent Toll Review for the NSW Government - Part Two: The Findings

2024-07-24T16:04:00.000+12:00

Following on from my previous post, this is a listing of the 16 findings of the review. Not the recommendations, but the findings. I have included some of my own comment on these at the end of each finding. Generally the findings are fair, although I think some of them are repetitive and essentially different sides of the same point. The findings have a strong consumer interest element to them, which is unsurprising given it was led by Allan Fels, but there is also some discussion around public policy implications and a bit around markets and delivery of services. Again it reads a bit like an ACCC series of findings, unsurprisingly.

For me, the main points are the lack of coherence around toll rate setting and structures, the inflexibility to apply time-of-use based pricing to better manage congestion and demand, and the poor policy responses to the current structures. The dominance of Transurban is valid in the toll concession process, but with the presence of E-toll, its retail market share is not monopolistic. Future envisaged toll roads are not intended to be undertaken as PPP concessions, indicating a willingness to take a different approach, although it should be possible to proceed with PPPs without the restrictions and constraints (including the toll rate escalators) implemented in previous years. Following this article will be one on the recommendations and what I think of those. However, for those outside NSW, the main benefit of this report is on lessons to apply elsewhere around toll rate setting, PPP contracts and taking a strategic network view, rather than an ad-hoc approach to separate major projects.

The structure of the findings is a summary of the findings from the report, followed by my brief comment.

The findings

1: The process for setting tolls has been flawed: Largely because governments determined them in advance of PPP concessions, rather than using competition in procurement to incentivise bidders to propose the lowest tolls needed to fund the roads. Long concession periods and higher than inflation cost escalators mean tolls in early years are lower than they should be, as the cost of the infrastructure is pushed towards future users more than early users. Efficient in road and toll operations almost entirely benefits owners of concessions and is not reflected in lower tolls. Comment: Ideally tolls should be proposed by project bidders or proponents and be subject to competitive pressure, and rigorous public sector scrutiny. It is worth reviewing the merits of allowing tolls to increase above CPI if costs do not do so, but not there is also no scope for tolls to reflect actual demand. Rigid concession conditions around tolls affect the ability for future tolls to be able to address distortions in pricing between tolled and untolled roads, and changes in demand across the network.

2: PPP details relating to toll setting are not publicly disclosed reducing information available to assist in public understanding: Commercial confidentiality claims around PPP agreements limit this information, and consequently increase public disquiet about toll rate setting. The Review noted that Base Case Financial Models are confidential and commercially sensitive, but said returns from PPPs are “generous”. The Review cannot publish the differences between actual revenue and model forecasts because of this confidentiality, making it difficult to assess whether tolls set are too high and whether excessive profits are being generated from toll concessions. Comment: Future concessions should enable regulatory oversight of the differences between actual and forecast revenue. A careful balance is needed between incentivising PPPs sufficiently and not enabling rent-seeking behaviour.

3: Toll road users bear a disproportionately high proportion of the cost of toll roads: The key issue is when toll roads bypass the untolled network and generate significant local amenity benefits. The Review noted the Cross City Tunnel (which provides a bypass of inner Sydney between east and west) which brings significant benefits to surface traffic, including property owners and pedestrians, but was expected to be fully funded by the users of the tunnel. There is a case for those others benefiting from the project to contribute towards its costs. Comment: Toll roads offering significant local amenity improvement, due to removal of traffic and enhancing of property values ought to be partially supported by revenue generated from surface traffic (through network charges such as fuel taxes) and property taxation from property owners. It is clear the Cross City Tunnel in Sydney is underutilised due to its high toll structure.

4: There is no overall system of tolls: Tolls are all set in isolation of each other, and although they could be set to send price signals to optimise the use of road infrastructure they are not designed to do so. The complexity of tolls as they are, including toll relief schemes, untolled motorway sections (which are often used by many motorists paying tolls on other sections). Comment: From a network perspective, tolls in Sydney send inefficient price signals that distort behaviour and do not encourage efficient network use. For example, overnight toll prices are far too high and ought to be set to remove traffic from surface streets whilst peak period tolls are often too low, and should be priced to encourage time and modal shift. There are no effective means to enable this.

5: The lack of a unified tolling system creates complexity, inefficiency, inequities and unfairness: With different vehicle classification systems and toll regimes, similar trips are priced differently across the network. Roads with similar levels of service are priced differently. Smaller trucks are in some cases charged the same as larger trucks, discouraging them from using some toll roads. Comment: As above, there should be more efficient pricing applied by location, distance and time-of-day and vehicle class. More standard pricing across the network, unless particularly costly parts of infrastructure are being used, would be rational and efficient.

6: Tolls are too rigid and locked-in for decades without options for review: No other sector of the economy sets prices for such a long period, certainly no other transport mode. This increases perceptions of unfairness over time, as prices rise faster than inflation. The Review reports modelling that around A$123 billion in tolls will be paid between 2024 and 2060. With no processes or means to review tolls during those concession periods, it raises serious questions as to why it is justifiable to have prices set for well over a generation through contract between the private sector and state government. Comment: Concessionaires like guaranteed toll levels and escalations, but no other investments in the private sector guarantee such revenues without regulatory oversight (see energy and water utilities which are subject to such oversight). This suggests that future PPPs have provision for regulatory oversight of pricing at regular intervals.

7: On most toll roads, time-of-day tolling is not used: At off-peak periods many toll roads are heavily underutilised, and at peak periods several can be highly congested. Pricing should enable better utilisation of the infrastructure. Comment: Generally, there are wider economic benefits in enabling better use of tolled infrastructure, especially since most of it has natural monopoly characteristics and there are some amenity benefits in enabling it. However, there is limited elasticity of demand off-peak, in that lower prices will result in lower revenues (as additional traffic is unlikely to offset reduced prices), although at peak times higher tolls that reflect demand profiles should improve congestion on a network basis and encourage modal shift. There are considerable merits in enabling time-of-day pricing, subject to regulation, in ways that do not undermine concession net revenues, but significant improve outcomes for the transport network.

8: The financial impact of tolls is greatest in Western Sydney: Western Sydney suburbs have the highest proportion of motorists paying over A$60 a week on tolls, reflecting the extent of tolled infrastructure in the West and the lack of useful alternative routes. This arguably affects access to employment and other opportunities for residents in those suburbs.

9: Transurban’s profitability has not been excessive in recent years, but its NSW toll road portfolio profitability is likely to increase over time in line with traffic and toll rate escalation, and declining construction costs: Sydney generates 50% of the toll revenue for Transurban, but its returns are not excessive when considered against the Weighted Cost of Capital. However, it is expected that profitability will row in future years. Comment: This is critically important, as it is important to ensure that Transurban isn’t extracting excessive rents from Sydney road users. However, it also suggests that the toll rate setting system for future concessions should not enable continued increases above inflation.

10: The level of tolls appears to be higher than necessary and desirable: This is in part, counting earlier points as follows. There was no competitive bidding for PPPs on the basis of toll price, concession agreements allow relatively high returns for multiple reasons including a regulated monopoly price safe from competitive challenge, incentives for efficiency are largely captured by concessionaires (and not shared with users). Toll roads are relatively free-flowing and potentially underutilised (indicating tolls are certain times are too high) and motorists perceive tolls as too high. Most of those surveyed who claimed tolls are too high tend to use alternative non-toll routes or reduce frequency of non-essential travel. 15% use other modes, but nearly 40% do not change behaviour (but pay the toll). Comment: There is clearly a distortion in travel between tolled roads and untolled roads essentially because of underpricing of untolled roads. Surveying the public about tolls is likely to result in an answer that many people think tolls are too high, but the real evidence is that the tolled network has much less congestion, on average than the untolled network. Many complain about tolls but still pay them, but that does not mean that tolls are not too high, but it does mean that this is overplayed. Toll roads take up land, and are high capital cost assets and arguably it is fair they generate a return on capital (even if this isn’t what explicitly happens with other roads). However, the negative externalities of pricing only part of the network are not insignificant, and there is a strong case for enabling time-of-use pricing.

11: Transurban has a dominant market share in the current provision of toll roads in Sydney: Although this is clearly the case, there is competition from untolled roads and other modes. Restrictions on Transurban include the limits on toll rate increases and the conditions on maintaining network quality during concession periods. Comment: Transurban has been commercial adept in expanding its presence in the market, but the “market” itself has entirely been driven by the State Government issuing concessions and the conditions it sets for those. The presence of the state account manager adds significant competition in terms of customer service, for “some” services, but concern over Transurban’s dominance is within the control of the State Government for future toll road concessions and in future regulation of them.

12: Transurban has been dominant in the NSW market for acquisition of toll road concession contracts: This is due to factors, such as its experience in bidding, the economies of scale of its existing operations and its access to in-house data on traffic and in modelling. It’s noted that of the four motorways under construction in Sydney today, two wont be tolled and the other two will be state-owned toll roads. Comment: This is essentially a repeat of the previous finding, and what matters is what impact it has on public finances, motorists and the economy. That hasn’t been explained clearly.

13: The significant position of Transurban in the toll retailer market could adversely affect competition for tolling concessions: Until 2019 there were four toll road retailes, but Transurban acquire two of them. Now it is Linkt (Transurban), E-Toll (State Government) and Eastlink (a toll road in Victoria) that hold the entire market, with Eastlink’s presence essentially only for a handful of vehicles that hold such accounts in Victoria visiting Sydney. Barriers to entry are not seen as significant, and clearly the presence of E-Toll makes a difference to Transurban’s performance in the market. Comment: There is a “could” here significantly diluted by the presence of E-Toll, but there aren’t enormous barriers to market entry and future concessions and toll roads should be open to more innovative solutions in providing retail services. This could include the growing mobile phone based suppliers, but longer term the inevitable implementation of RUC in Australia should see providers of such services also being able to supply toll retail services to their customers (e.g. telematics service providers for heavy vehicles).

14: Current tolling information fails to adequately enable, inform, and educate motorists thus reducing user empowerment and efficient decision-making: There is no “one-stop” platform for motorists to obtain all tolling information (including available rebates) and undertake trip planning in a way that is easy to use. Signage about toll rates is inadequate to give motorists sufficient time to adjust route choice. Retail toll platforms do not allow motorists to project future toll usage. There is little understanding as to how tolls are calculated, or understanding about toll administrative charges, and what revenues are used for on non-PPP toll roads. There is also insufficient information about the rights and responsibilities of toll road customers. Comment: This is true, although there is nothing stopping there being such an app or platform to do this, other than the lack of commercial interest in doing so. Signage should better enable route choice, and even could compare travel times by tolled and untolled road, although this would have to be the responsibility of the public road controlling authorities.

15: Toll reform is preferable to toll relief: The current toll relief schemes are inadequately targeted and underutilised, in part due to overly complex administration. Toll relief is not financially sustainable given the existing pattern of toll escalation and limitations on the availability of government resources to fund relief: This is focused on the M5 toll relief scheme which is confined by geography, does not have processes for review. It appears to be politically entrenched and is likely to have significantly affected transport and land use decisions along the M5 corridor. This and other toll relief schemes are blunt and likely to be financially unsustainable, and likely to primarily benefit higher income earners. It would be preferable to reform tolls more widely. Comment: Clearly the current toll relief schemes are inefficient ways to address public concerns about toll rates, and it would be much preferable to phase it out and reform the toll system more widely.

16: Concessionaires are an unintended beneficiary of the current approach to toll relief. Increased traffic and patronage of toll roads, through induced demand created by toll relief, directly benefits operators by increasing their revenues: By subsidising tolls, toll relief effectively benefits concessionaires by subsidising demand for their facilities. It is not enough to generate funds beyond agreed levels that would require upside sharing with government, but is enough to benefit Transurban. Comment: This highlights the inefficiency of toll relief as a subsidy from other road users and taxpayers to concessionaires and the beneficiaries of relief.

"Motorists First" - Findings of the Independent Toll Review for the NSW Government - Part One: Background

2024-07-22T17:53:00.002+12:00

This is the first in a multi-part series about the epic toll review.

“Motorists First” (PDF) is the title given to the latest report on tolling in Sydney. Led by Professor Allan Fels. Fels is best known as having been Chairman of the Australian Competition and Consumer Commission between 1995 and 2003. The focus of his career has been on breaking monopolies, and he took this opportunity of leading the Independent Toll Review for the Minns’ Government in New South Wales to try to do the same to Transurban – which has a stake in most of the toll roads in Sydney.

The review was announced in July 2023, three months after Labor won the state election, but it follows a long line of reviews of tolling in New South Wales (by which I mean Sydney as there are no toll road outside the greater Sydney metro region). The review posted this handy list of the reviews undertaken by multiple NSW state governments.

Major toll road openings and New South Wales tolling reviews over 21 years

Why so many reviews? Sydney has one of the most extensive toll road networks of any cities globally, although I have yet to see any detailed research to identify whether it has the biggest tolled road network of any city (Santiago, Chile has quite a network).

Most people are aware of the Sydney Harbour Bridge, opened with tolls in 1932 and still tolled, but much of Sydney’s urban motorway network has been funded through tolling and financed through a patchwork of PPPs. The latest review notes that of 320km of motorways,156km are tolled. Although there are alternative routes, it is slow and inconvenient to drive from the north or south of Sydney towards the airport or city centre without using toll roads.

Sydney's tolled and untolled motorway network

Untolled sections were mostly built in the 70s and 80s, whereas the tolled sections have been built since then, with more under construction (the Western Harbour Tunnel and Stage 1 of the M6, which eventually will bypass Sydney’s southern suburbs towards Wollongong).

The 382 page review has a lot of information in it, and so is worth pouring over for those who are interested. Here are some highlights that I found of interest:

• Only around 4% of journeys (using any mode) were made using toll roads, and 7.6-8.8% of car journeys are undertaken using toll roads at least once.

• There are 10 PPP concessions and 2 state government owned toll roads, Transurban has some shareholding in all of the PPPs (ranging from 50-100%).

• 56% of the toll retail market is held by the state operator E-toll, and 44% by Transurban operator Linkt. This suggests that a majority of toll road users prefer having the state as account manager, not the operator of most of the toll roads (only the Sydney Harbour Crossings are not at least partially owned by Transurban)

• Westconnex has the biggest proportion of toll road traffic and revenue.

• Toll rates on all routes, except Westlink M7 and Westconnex are point charges (M7 and Westconnex have flagfalls plus a per km rate)

• Only the Sydney Harbour crossings have prices that vary by time of day (A$4.27 peak, A$3.20 interpeak and A$2.67 off peak), but there are only tolls in one direction on the crossings (and the Eastern Distributor).

• Toll escalation factors for the PPPs tend to be based on the greater of CPI or 1% per quarter.

The review includes this handy chart describing the ownership and key suppliers throughout the supply chain for all of Sydney toll roads:

Sydney toll road ownership/supplier distribution

What's the problem?

What’s the problem?

Fundamentally there are public and political concerns that tolls are incoherent and unfair, largely because each toll concession has seen tolls set that reflect the cost of supplying each individual segment of tolled road at the time it was built. This has resulted in a network that isn’t priced like a network, but priced ad-hoc. The result of this has seen a range of interventions by the state government which are arguably also heavily flawed, including the M5 Cashback scheme, which gives refunds to regular users of that toll road, and was set up entirely for political reasons. That scheme alone costs around A$127m per annum.

What did the Review find?

16 findings were published by the review, which I will summarise in my next post...