Mirroring similar charges announced in Victoria, the New South Wales Government says lost revenue from fuel excise will be replaced with an EV (electric vehicle) road user charge in the future. Here’s why EV road user charges aren’t necessarily a bad thing.
How we pay for things changes all the time and motoring is no exception.
Cars need roads and roads are expensive things to maintain. Yes, everyone complains about them, as do the citizens of virtually every other country. But we need to cut the governments of Australia a little slack. Why? We have around 823,000 kilometres of road, of which 356,000 kilometres is paved and we have a population of around 27 million. In contrast, the UK has just 400,000 kilometres of road, almost entirely paved, and a population of 67 million to pay for it.
One way Aussie roads are paid for is via fuel excise, which is currently $0.46 per litre. That comes to around $13 billion per year, collected by the Federal Government. You may recall that in 2022 the excise was halved to $0.23 per litre to provide Aussies with some relief from increased fuel prices caused by the effects of COVID and the Ukraine war. But not all of that revenue goes to roads, only around 53% by some estimates. Still, that’s largely how our roads are paid for, by you, at the fuel pump.
What about the switch to EVs?
But what about the switch to EVs? There’s no fuel excise to pay, so there’s a $13 billion gap in the budget. Enter a road user charge where you pay the government per kilometre you travel, which is in effect how the fuel excise works.
The road user charge currently applies only to zero/low emission vehicles (ZLEVs). In practice, this means vehicles that can be powered by batteries you can recharge, so electric vehicles and plug-in hybrids. There is a valid point about whether a ZLEV is truly a ZLEV when considering its lifecycle as opposed to its emissions when running, but we’ll leave that for the moment.
Many owners of ZLEVs are opposed to the road user charger on the basis that at this point the government should be doing more to encourage ZLEVs, not less, and the road user charge is of course a disincentive to buy an EV. I can understand this view and have sympathy for it. But the fact is that EVs use the road, and should pay for it especially as they are heavier than non-ZLEV vehicles. And as ZLEVs make no economic sense at present for the average Aussie, it stands that the average ZLEV buyer can probably afford a little extra tax.
The EV road user charger is still cheaper than the fuel excise
In any case, the EV road user charge is cheaper than the fuel excise. If we take the average Australian mileage of about 15,000 kilometres per year, then at 8L/100 kilometres you’re paying $552 in fuel excise, but at a road user charge of $0.026 per kilometre you’re paying $390. Quite a bit less. And given most EVs are relatively short-range city vehicles, then the EV owners are ahead.
Let’s change the equation to long-range travel. Say you use 14L/100 kilometres of fuel and drive 25,000 kilometres per year … not out of the question for many readers. That’s $1610 you’re paying in fuel excise, but at an EV road user charge of $0.026 then that’s only $650.
So what of the future?
So what of the future? Well, don’t be thinking that your contribution to government coffers is going to decrease. The fact is, roads are expensive to maintain and roads aside, the cost of providing government services is going up whilst government revenue is, in general, not increasing at the same rate. Therefore don’t expect the government to give up the loss of the fuel excise as EVs come online. Expect the EV road user charge to increase, and maybe be weight-based too.
The world is shifting to usage-based services. Think about the way you used to buy records, CDs and cassettes. Now you have a Spotify subscription. Same for streaming movies and cars are going the same way too with pay per month for features like heated seats. It makes sense for vehicle usage to go the same way. Even insurance could be, and is in places, based on pay-per-kilometre. I’d like to see annual registration be done away with and move towards a usage-based tax too.
A less desirable side to usage-based pricing
Now there is another side to usage-based pricing that’s potentially sinister. It’s behaviour tracking, seeing exactly what you do and how, and basing pricing on that. Let’s take insurance. Right now, the insurance companies figure out a premium based on your age, car, location etc. You know the score. But what if you paid per kilometre and how much you paid depended on where you drive…and how?
Go hooning, premium shoots up. Park in a high-risk area, pay extra for the hours you’re there. Privacy is further eroded, the tradeoff being lower prices or in some cases simply no alternative – try living life today without a smartphone and email address. And where you have usage-based pricing, then you have the means to control user behaviour; increase premiums as you drive in a given area, and people avoid it. Governments too can use usage to drive behaviour. Controlling what people do can be a force for good, or evil. I’ll just say history is a great teacher.
So will these usage-based payment systems be good news for you? Maybe. If you own multiple cars and trailers, one or more of which is low-mileage, then you could well save money on its annual run cost. However, you may pay more for your high-mileage vehicles. But isn’t it fair to pay based on your consumption of resources? Whether you agree or not, that’s the future.