30 Jan 2018

Green vehicles threaten roading fund

11:46 am on 30 January 2018

Driver lobby groups say the government's road funding kitty will be severely depleted in coming years as more electric and fuel-efficient cars hit the road.

Fuel taxes contribute much to the National Land Transport Fund.

Fuel taxes contribute much to the National Land Transport Fund. Photo: 123RF

Almost all of the National Land Transport Fund (NLTF) comes from road-user charges and fuel taxes paid by drivers of diesel and petrol vehicles.

In comparison, electric vehicle users contribute little, sparking concern that more of them on the road will result in a major funding shortfall.

Automobile Association principal adviser Barney Irvine said it was a real possibility the transport fund would be increasingly out of pocket.

"As the number of EVs on the roads goes up and as petrol engines become more efficient we're going to see a big hole emerging in the fuel tax take, so it's a really big concern."

The country's entire state highway network, including maintenance and repairs, safety upgrades and police enforcement is funded under the NLTF.

For every litre of petrol purchased, just over 50 cents goes into the fund.

The Transport Ministry estimated drivers of an average-sized petrol car contribute about $600 a year.

A light-diesel vehicle user pays the same in road-user charges - which also goes into the fund.

Ministry figures show drivers of electric cars save about $600 a year by not contributing through either avenue.

The road-user charge exemption is in place to encourage consumers to buy electric, in an effort to reach the Ministry's goal of 64,000 e-cars on the road by 2021.

Mr Irvine said electric vehicle users were scheduled to start paying their way once they made up two percent of the total transport fleet.

However, he said this would still not address the funding gap.

"The exemption is scheduled to be lifted in 2021 which means EV's will be required to pay road user charges but that won't solve the issue of vehicles in general becoming more fuel efficient, we'll still have the problem of the hole in the fuel excise system and the fact is that the fuel excise is the main way that we pay for our transport system and we need to make sure that the system continues to work."

The Transport Ministry estimates the revenue lost by e-cars not paying user charges or petrol tax will total $70 million by the end of 2021.

But its principal advisor, Brent Lewers insisted there was no cause for concern, adding that the lost revenue will be only a fraction of the country's total income generated through fuel excise and road-user charges.

He says no roading projects will suffer because of the foregone revenue and said once electric vehicle users start paying, the deficit would balance out.

"It's going to balance out, EVs will start paying at the same rate that small diesel vehicles do now and that's about six cents per kilometre. Broadly people switching between petrol vehicles and non-petrol vehicles doesn't make any significant difference the numbers are set so that it all comes out to be about the same."

"At the moment petrol and vehicle users are subsidising EV users, that was part of the electric vehicle set of initiatives that the government announced in May of 2016 which was designed to encourage people to buy more EVs

Motor Industry Association chief executive David Crawford said the funding model needed overhauling sooner rather than later.

"Say 2028 that's ten years on from now, we could have probably 20 to 30 percent less road funding. My view is that the government is going to have to change the funding model quite significantly at some point in the next ten years otherwise they will not be able to generate the amount of funding that's required to maintain our roads."

Mr Crawford said the government should look at removing fuel excise duty and switch to a distance-based road-user charge system.

"It would be charged electronically based on the actual distance that you travel on the road, we consider that as a much fairer way of paying for your use of the road. The beauty of an electronic road-user charge is that it enables roads to be priced based on the time of day that you're using it so in the cities you could use it as a mechanism for controlling peak traffic flows."

Mr Crawford said overhauling the system would be radical, but was likely to be the best option.

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