Opinion article

To support Australia’s transition to electric vehicles, road funding reform is needed

Reforming road funding is a critical step in preparing for the mass adoption of electric vehicles, writes Transurban CEO Scott Charlton.

Long gone are the days that electric vehicles are confined to short suburban trips due to a lack of public charging stations. Australia’s electric highway means motorists dreaming of an east coast holiday could now drive from the southern-most tip of mainland Australia, Wilsons Promontory in Victoria, to Cooktown in Far North Queensland. One of the fast-charging stations they might stop at is in Bowen, Queensland, next to the jetty. It’s one of the many fast charging stations being rolled out across Australia. 

But in doing so, another, very different challenge is presented. From Wilsons Promontory to Cooktown, the owner of the electric vehicle hasn’t paid a cent in fuel excise to use the roads. If that same driver travelled the same route in a regular car, they would have paid over $570 in petrol, with fuel excise accounting for around $190 of their total fuel cost. But it’s highly unlikely they would have any idea how much of their fuel cost was being collected as tax or how it was being used. 

Fuel excise is the single largest source of road-related revenue collected by government and contributes towards the maintenance and development of roads. 

A recent survey conducted by Transurban of 3000 people in Victoria, New South Wales and Queensland found over 80 per cent of respondents knew nothing, or only a little about how roads are funded. This is evidenced by the fact that 14 per cent of respondents could accurately identify how much they paid per litre in fuel excise, currently charged at 43.3 cents per litre of fuel. More than 40 per cent believed they paid under 20 cents per litre, less than half the current cost of fuel excise. Low awareness of fuel excise means the future funding shortfall facing governments, and the impact this could have on the quality of road networks around the country, is largely invisible to most.

It’s important to stress that electric vehicles are not the problem. They are vital to the decarbonisation of our transport networks, the urgency of which was writ large in the Intergovernmental Panel on Climate Change’s Sixth Assessment Report, which warned of increasing extreme weather. 

The problem is that Australia’s road funding model, like many around the world is outdated and no longer sustainable. It relies heavily on fuel excise, a tax that has been declining in real-terms for decades due to increasing fuel efficiency of our national fleet. It is also unfairly penalises those motorists with older, less fuel efficient vehicles, who pay more at the pump.

And widespread adoption of electric vehicles will make the problem worse.

While only 0.78 per cent of all vehicles sold in 2020 were electric, they could soon account for a higher proportion of new car sales. Our survey found 42 per cent of respondents would like their next car to be an electric vehicle, with 84 per cent motivated by both environmental benefits and reduced operating costs. 

Reforming road funding by implementing a national road-user charge in place of fuel excise and other road-related charges such as licensing and registration, is something that has long been advocated for by government and industry including Infrastructure Australia, Infrastructure Victoria, the Productivity Commission, the Harper Competition Review, the Henry Tax Review and Transurban. 

Infrastructure Australia’s 2021 Australian Infrastructure Plan recommends Australia adopt a user-pays model for transport services, to ensure a fairer, sustainable, and more efficient network. 

While a complex reform, our research indicates that motorists would prefer it over the current road funding model of fuel excise and other road-related taxes, with half nominating it as their preferred option, compared to 32 per cent favouring the status quo. However, preference for the current model declined to 23 per cent when respondents were made aware that it would potentially result in less government funding for future roads and infrastructure projects.

Despite a road-user charge being the favoured option, the research showed that around a third of people would want to see concessions in place for those with low incomes, all revenue collected be spent on infrastructure, and for costs to vary depending on location of the road so those in regional and remote locations were charged less per kilometre. These would be important insights to consider in a reform process. 

Change is already occurring at the state level, with a distance-based road-user charge now applied to electric and plug-in hybrid vehicles in Victoria, with similar schemes announced but not yet implemented in New South Wales and South Australia.

Independent modelling conducted by EY Australia for Infrastructure Partnerships Australia earlier this year found that owners of electric vehicles in Victoria could expect to pay around $330 each year through a distance charge, while the average petrol or diesel motorist pays $600. 

Overall, 68 per cent of respondents in our survey thought it was fair for electric vehicles to be charged per kilometre for using the road.

Reforming road funding is a critical step in preparing for the mass adoption of electric vehicles. While the adoption of electric vehicles is inevitable, there is more that can be done to encourage faster adoption so we can all realise the environmental benefits sooner.

To help play our part in encouraging adoption of electric vehicles we are developing a range of initiatives to highlight the benefits of electric vehicles to our 5.7 million Australian customers. This includes incentives such as electric vehicle giveaways and customer experience programs to give them the opportunity to try out the vehicles and take them on a trip of their own. 

Whether it be the quintessential east-coast road trip, or your local suburban street, road funding reform will help maintain Australia’s 800,000 kilometres of roads as we transition to a decarbonised future. 

About the authors

Scott Charlton

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Scott Charlton is the CEO of Transurban.

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