Regional fuel tax - is it fair?

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Posted on: 1 November 2017    

The new government’s announcement that they will be charging Auckland drivers a regional fuel tax is a response to the funding gap required to address the transport infrastructure needs in New Zealand’s biggest city.  Auckland has complex transport problems which require large scale, expensive infrastructure solutions such as a City Rail Link and light rail to the airport, and a regional fuel tax targets travellers who use the local infrastructure. 

Arguably transport infrastructure in Auckland benefits everyone who lives in New Zealand.  By supporting our country’s biggest city and economy, it could be viewed that all New Zealanders should pay to get Auckland moving. The idea that the whole country should pay for one region’s issues is in effect how the current funding system for transport works.  Revenue from fuel tax and other sources forms the National Land Transport Fund which is used to fund transport – prioritised through a combination of economic efficiency, strategic fit and effectiveness, which in many cases will mean Auckland infrastructure has high priority.  However, by creating a regional fuel tax and legislation to support it, Auckland is able to shortcut this prioritisation system, and generate additional revenue to be used directly for its own purposes.

Regional fuel taxes are a simple way to provide more funding, but they are also a coarse representation of the costs of driving. It is true that driving in Auckland imposes greater costs on society than driving outside of cities, since additional vehicles contribute to congestion, pollution, and crash risk.  However, a regional fuel tax does not distinguish between vehicles driving in the CBD (where alternatives to driving are available) and in more remote suburbs of Auckland where many lower income households are dependent on driving, because no feasible alternatives exist. They also perversely benefit more wealthy drivers who can afford newer, more fuel-efficient vehicles which use less fuel.  Therefore, the incremental cost to lower income households of introducing a regional fuel tax is likely to be greater.

A fairer system could be to create an intelligent distance-based charging system, which would require drivers to pay more if they drive in congested locations such as the Auckland CBD or in high crash risk areas.  This would target those who are causing congestion or contributing to the increased crash risk.  The technology to deliver such systems are already in existence, with trials underway in Oregon.  Abley’s existing tools to map congestion and crash risks can be used to identify how driving costs differ across the country, including within Auckland. 

If electric vehicle use and vehicle efficiency continues to grow at the current rate (100% growth in electric vehicles per year), it won't be long before fuel consumption drops and the revenue from fuel taxes diminishes. At that point, the conversation about how to generate revenue to design, build, operate and maintain infrastructure in the future will become critical to the country as a whole.  We have an opportunity now to investigate how best to combat this future problem in an equitable manner, which will fairly charge drivers according to their use and the costs they impose, rather than charging everyone the same amount.  Read more on the future conundrum electric vehicles bring to the funding system in my future blogs.

Blog written by Jo Draper, Principal Transportation Planner, Abley Transportation Consultants

Phone: +64 9 281 2177

Email: Jo.Draper@abley.com

 

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