Time to replace petrol tax with technology
Dr Patrick Carvalho at the NZ Initiative writes:
Under our fuel tax regime, a driver basically pays the same amount of petrol duties regardless of when and where the car is used – thus adding to the congestion in already overcrowded roads.
Moreover, fuel taxes are blatantly regressive, which means low-income families tend to bear a disproportionate share of road funding costs.
To understand the regressive feature of petrol taxes, it is necessary to look at the relationship between fuel economy and road usage.
The rationale for petrol taxes lies in the user-pays principle. In this sense, the fuel excise duty would be a proxy for road usage: the longer the distance travelled, the higher the tax dues.
Petrol tax receipts are, however, proportionate to fuel consumption patterns. This is in contrast to road user charges on diesel-powered vehicles, which charge drivers based on the exact mileage travelled.
Petrol tax, when introduced, was the best form of user pays available. It was an indirect form of user pays.
New Zealand should look at well-tested road pricing experiences worldwide to implement a comprehensive user-pays system based on three elements: distance, time and location.
Sounds the ideal to aim for.
Singapore, which started with a paper-based scheme in 1975, will implement a new network-wide, satellite-based road pricing system as early as next year.
Several other countries – including the US, the UK, Germany, Canada, Japan, Sweden and Norway – have also implemented different versions of road pricing arrangements and technologies. These are useful test cases, providing both success stories as well as lessons.
It is time New Zealand joined global best-practice in managing and funding its roads and highways.
First, outdated fuel taxes must go. Petrol-powered cars should be migrated to existing distance-based road user charge scheme in line with diesel-fuelled vehicles.
Easy to do now. Most cars drive with a GPS device in the car.
Second, without fuel taxes, the carbon footprint of cars should be consistently priced using the Emissions Trading Scheme. Further regulatory and explicit subsidy arrangements may also follow, helping address any remaining environmental concerns.
Third, congestion charges based on time and location would ensure a more reliable, faster and safer traffic flow. Evidence shows that even small but flexible charges can have a significant positive impact on road demand management.
As Professor Vickery once said, “You’re not reducing traffic flow, you’re increasing it, because traffic is spread more evenly over time. Even some proponents of congestion pricing don’t understand that.”
Fourth, while distance-based road charges should be the main source of road funding, congestion charges based on time and location should be used to reduce car queuing in busy roads. Hence, any additional net revenue from congestion charges should be ring-fenced to ease respective local traffic conditions.
Always been a fan of congestion charges. You should pay more at peak time than at 5 am.