Few remember Iceland when discussing experience in road user charging (RUC) in Europe, perhaps because it is an island (and so has virtually no foreign vehicles visiting), and it is also not a member of the European Union (but then neither are Switzerland or Norway). 

Iceland has had for many years a RUC for heavy vehicles, in the form of a fairly simple weight-distance charge on vehicles with a maximum allowable mass of ten tons or greater.  In 2008, it raised IKK1.083b (US$7.8m).  

RUC for EVs and plug-in hybrid vehicles

However, Iceland is about to leap ahead of all other European countries in being the first to implement a nationwide distance-based RUC for electric, plug-in hybrid and hydrogen vehicles from 1 January 2024.  Consultation on a draft Bill (Icelandic only) to implement this charge has recently closed. Iceland Monitor reports that the fee will be ISK6 per km for electric and hydrogen powered vehicles (US$0.043 per km or US$0.069 per mile), but hybrids will be charged only ISK2 per km (US$0.014 per km or US$0.022 per mile), to reflect that they continue to pay fuel taxes. 

Iceland has had a significant growth in electric and hybrid vehicles, with 85% of new light vehicles sold in Iceland in 2022 being electric or plug-in hybrids.  This reflects a VAT exemption for such vehicles, and other very low taxes. 73% of Iceland's electricity comes from hydro-power and almost 27% from geothermal energy, so electricity prices in Iceland are immune from international commodity prices.  Nearly 20% of all cars in Iceland are either electric or hybrid of some form, so the impacts on fuel tax revenues have been considerable.

So Iceland will have surpassed the rest of Europe as no European country has so far mandated or even agreed to introduce some form of distance-based RUC for any light vehicles at all. 

RUC for all vehicles

This isn't the end, as the Icelandic budget indicated that the introduction of the new fee will be monitored in 2024 with an eye to applying it to ALL vehicles under ten tons, and to review the future of taxation of petrol and diesel. This had led to speculation that Iceland could put all vehicles on RUC and reduce or abolish fuel taxes used to fund the transport system. If it does so, then it will be a world-leader in transitioning from fuel taxes towards RUC, and so shifting from taxing energy to taxing road use.

I've been very busy, but there are some announcements worth noting as follows

Western Australia announces it will introduce distance-based RUC on EVs in 2017

As part of an package of measures to incentivise increased sales of electric vehicles, the Western Australian Premier has announced that the state government will introduce 

 introduce a distance-based road user charge for zero and low emission light vehicles commencing from July 1, 2027 to ensure all motorists pay their fair share towards the maintenance and construction of WA roads.

A base rate of 2.5 cents per kilometre for electric and hydrogen vehicles and two cents per kilometre for plug-in hybrid electric vehicles will apply, with both rates indexed to the Consumer Price Index.

This parallels what has already been announced in New South Wales, what has been introduced in Victoria in 2021 and what was also announced for South Australia (but for which the recently elected Labor Government has vowed to repeal).

Western Australia has some history in looking at heavy vehicle RUC, but it will be interesting to see how this may be implemented, as it could be a simple odometer reporting based system given there is little interstate light vehicle traffic. 

New Zealand Government to make announcement on progressing congestion pricing in Auckland next week

It has been studied and investigated for some time, but Radio New Zealand is reporting (alongside other media outlets) that when the New Zealand Government Emissions Reduction Plan is released on Monday 16 May, it will also announce it will implement congestion pricing for Auckland.  It is likely to be focused on a downtown inner city cordon-style scheme at peak times only, but with the potential to expand into corridor charging beyond that. It also appears that the net revenue may be used to offset a cut and eventual abolition of the Auckland Regional Fuel Tax established only in 2018 to help fund transport projects in the city.  That tax is currently at NZ$0.125 per litre including Goods and Service Tax.

Virginia to launch RUC for EVs on 1 July 2022

Virginia will be the third US state to implement distance-based RUC for light vehicles on 1 July according to NBC12.  Branded "Mileage Choice" it will offer EV, hybrid or other ultra fuel efficient vehicle owners the choice of paying by mile instead of paying a flat annual fee for registration (currently US$109 per annum).  Distance will be measuredly a plug-in device supplied by Emovis, with an initial odometer reading captured by smartphone imaging to register.  

The Infrastructure Investment and Jobs Act, currently before the US Federal Congress, would “establish a pilot program to demonstrate a national motor vehicle per-mile user fee to restore and maintain the long-term solvency of the Highway Trust Fund and achieve and maintain a state of good repair in the surface transportation system”.

It is also continuing the successful partnership between state and Federal Governments to fund investigations into RUC.

The Australian State of Victoria looks set to be the first Australian jurisdiction to introduce road user charging (RUC), albeit for light zero-emissions vehicles (ZEV), from 1 July 2021.  Legislation has been introduced to the Victorian Parliament to put this policy into effects which sees the following introduced:

A$0.025  per kilometre (US$0.03 per mile) RUC for zero-emissions vehicles, specifically pure electric and hydrogen powered (and any other zero emission vehicle).  

A$0.02 per kilometre (US$0.024 per mile) RUC for plug-in hybrid vehicles.  Presumably the lower rate for plug-in hybrids acknowledges that they also use petrol (and pay the fuel tax on that, albeit all of that money is collected by the Commonwealth Government, not the Victorian state Government).

The RUC wont apply to conventional hybrid vehicles (those essentially petrol or diesel-electric hybrids fuelled by petrol or diesel).  

The charges will be collected at the time of registration fee collection with vehicle owners asked to supply odometer readings. This represents a very simple approach to collecting this data, and has some parallels with the first RUC pilot operated in the US State of Hawaii, which used odometer data collected at annual vehicle safety inspections to generate mock invoices comparing a RUC with what is paid now with fuel tax (Hawaii is investigating the merits of RUC to apply not only to electric and hybrid vehicles, but all light vehicles).

The revenue collected from the new RUC will be initially dedicated to funding infrastructure to support electric vehicle growth.  Specifically:

This will include new electric vehicle charging infrastructure and reforms to enable electric vehicle ready new buildings.

It is important to note it is LIGHT vehicles only (heavy vehicles are subject to a different pilot programme for RUC being led by the Commonwealth Government in Canberra).  The Victorian Government estimates that these charges are still substantially lower than what petrol or diesel powered light vehicles pay in fuel duty to use the roads.  They are estimated to pay around A$600 a year in fuel duty, on average, whereas RUC should generate around half that.  In other words, ZEVs will still be driving at a discount to use the roads in Victoria compared to conventionally powered vehicles.

What will vehicle owners need to do?

From 1 July 2021, existing ZEV owners have 14 days to lodge an initial odometer reading with VicRoads, and then the distance is reported when the owner updates the vehicle's registration (which can be done annually, half-yearly or quarterly). Odometer declarations need to be supported by "evidence" which is yet to be defined by registration. In US jurisdictions with this system, there is a specific app (VehCon's OdoPhoto for example) to record images on a smartphone and "fingerprint" a vehicle's dashboard to reduce the scope for fraud.  Maybe this will be required? An alternative could be for the telematics system built into the vehicle is used as a platform for an application to transmit such data, but that would require both an application to be developed and installed, and for VicRoads to have a contract with the telematics systems supplier for such a service, which seems unlikely between now and July.  Third-party devices could also be installed to report such data, although again it is unlikely this will be available in the timeframe. Given distance reporting is at the most, quarterly, the need to constantly report trip data doesn't exist. However, some questions remain.

What about distance travelled out of state? Well Victoria will tax you for that, as without any means to identify location along with distance yet specified (although it could be), all distance means ALL distance, including drives to and within other states. This presents an obvious issue if a neighbouring state introduces a similar RUC system which limits distance charged to that within the state.  If a Victorian ZEV drove to South Australia it might face paying a South Australia RUC along with its own.

What about distance travelled off-road? Realistically there wont be much of that, but longer term it will be an issue for vehicles in rural areas on large farm properties or privately owned roads. 

How will enforcement be carried out? Depending on the evidential requirements, there will still be a need to check that odometer reading data is correct, which is not just about fraud, but also inaccuracy (simply misreading the number and reporting it incorrectly).  It is far from clear whether Police might check on odometer readings, but it will depend on the concept of operations developed for reporting readings and verifying them.

What happens when vehicles are sold?  The issue being that if you sell the vehicle and haven't reported distance correctly, who is responsible? The easy answer is caveat emptor, which will require some education of those buying ZEVs to want evidence that RUC is up to date.

What about out of state vehicles? On the face of it, none of it applies to them, so if you have a second address that you can register your ZEV at, outside Victoria, then you might see some advantage in this, but for the sake of a few hundred dollars a year it might not be worth it.  It's not clear how many out of state ZEVs enter Victoria regularly, but it is unlikely to be very low.  Still, you would expect any policy to be able to be future-proofed against the growth of such vehicles over time, and it is not quite clear that it is yet.

Conclusion

Victoria is clearly pre-empting a longer term trend for ZEVs to progressively displace conventionally powered light vehicles, and so it is setting up a new source of revenue from those vehicles.  It wont earn much money, but in ten to fifteen years if the vehicle fleet has 15-20% ZEVs, it will be a sizeable sum that Victoria can use to contribute directly towards road infrastructure costs (and this is money that otherwise might have been collected by the Commonwealth if the vehicles were powered by petrol or diesel). There are questions around implementation, but as the first mover on this, Victoria is starting to shape policy.  It doesn't need to focus on any of the issues above, except enforcement, in the short term, but it seems difficult to sustain a system that charges for all distance travelled by Victorian registered ZEVs, but none for out of state vehicles.  Current rates of ZEV ownership in Australia are so low that this is not likely to present a short-term challenge, especially as distances and infrastructure make interstate driving of ZEVs challenging (although plug-in hybrids are fine), but it starts to look like there needs to be at least some co-ordination between states and territories on this issue in advance of obvious issues such as interoperability, enforcement and out-of-state travel.

 The South Australian Treasurer announced with his budget that:

The government is intending to introduce a road user charge for plug-in -electric and zero emissions vehicles. The charge will include a fixed component (similar to current registration charging) and a variable charge based on distance travelled. Electric vehicles do not attract fuel excess and therefore make a lower contribution to the cost of maintaining our road networks. The proposed road user charge will ensure road maintenance funding is sustainable into the future. The government is consulting with other jurisdictions about the details of the proposed road user charge. Current estimates are that less than about$1 million per year will be collected by the charge.

Note that the South Australian Government doesn't collect fuel excise duty, the Commonwealth Government does, and fuel excise isn't hypothecated, and you'll see that this is a clever means by which an Australian state is seeking to plan for a long term future whereby it grows effectively a new revenue source, whilst an existing revenue source for the Commonwealth Government is slowly eroded by changes in the vehicle fleet.

There is considerable wisdom in moving early on this, not least because the sheer number of electric vehicles in South Australia (I heard an estimate of 800, but I might be wrong), would mean that it is not going to be costly to implement or politically difficult when so few would face paying it.  If any jurisdiction waits till 10% or more of the fleet is electric, it will be harder administratively and politically to implement.  

To date three jurisdictions globally have light vehicle RUC based on distance.  New Zealand (which has all diesel vehicles under 3.5 tonnes paying RUC and will expand this to include electric vehicles from the end of 2021), Oregon (which has a pilot for alternatively fuelled vehicles to pay RUC) and Utah.  Wyoming has announced that it wishes to follow, and multiple US states are piloting it.  South Australia would heed well to learn from all of those systems.

Infrastructure Partnerships Australia (IPA) has been actively pushing for this sort of reform, with its report in November 2019 proposing it.  It advanced three options, from Federal leadership, to State collaboration, to State unilateralism. It looks like this is the first part of the second option (and frankly the third option is difficult to sustain for states with considerable cross border traffic).  This advocacy is to be welcomed, and needs to be supported by a comprehensive programme that ensures that South Australia's proposals succeed

There are some key issues South Australia needs to address in this process, none of which is clear from the news coverage to date:

1. Get the communications right:  The number one failure of ALL programmes to introduce direct user charging on roads is not clearly addressing concerns from motorists and not clearly communicating the policy purpose, what will be done with the revenue, how the rate will be set and reviewed, and what users will need to do. From the media coverage seen so far, South Australia has not done this as well as it could. Take this article which is so full of flaws it's not funny. 
2. Clarify how little impact road user charging (RUC) will have on electric vehicle takeup.  New Zealand has an exemption for electric vehicles paying RUC until the end of 2021, but when they eventually do pay, they'll pay around A$0.07 per kilometre. So for the average vehicle that may travel 12,465km a year that is A$872.55 a year. Noting that in NZ, fuel duty and the RUC rate are meant to be equivalent. Fuel duty in NZ is equal to about A$0.663 per litre, whereas in Australia it is A$0.423, so RUC might be assumed to be proportionately similar, say around A$0.045 per kilometre - that's around A$561 per annum for an electric vehicle owner, which is not going to be a great disincentive compared to the savings on fuel and operating costs which are much more than that. US states are not concerned about RUC affecting electric vehicle takeup, as Oregon and Utah have already implemented RUC for such vehicles, and multiple other states are piloting or have piloted RUC for such vehicles (see Hawaii, California, Washington State, Colorado).
3. Be clear on what is to be done with net revenues:  Fuel excise duty in Australia is not hypothecated, but the lesson from every other jurisdiction, from New Zealand to the USA to Europe, is that hypothecating RUC revenue is critical to public acceptability and also accountability for moving from a taxation model to a user pays model. I know Treasuries are loathe to want to treat any taxation as hypothecated, which harks bark to the failures of hypothecation in the UK in the 1930s, but there are plenty of models of hypothecation working well (New Zealand has done an excellent job having evolved towards hypothecation in the 1980s and 1990s). Yes, it will be very little money from the start, but dedicating net revenues towards the State's road maintenance budget would be a good start.  There will obviously have to be longer term discussions about what happens to the money received from the Commonwealth when fuel excise duty revenues really do erode.
4. Establish a process for setting and reviewing RUC rates that is transparent and linked to what other vehicles pay and cost allocation:  As long as fuel duty is dominant, RUC will be linked to it, but in principle, RUC rates should be based on recovery of fixed and marginal costs of road infrastructure use.  Motorists fear that a new charge will be set based on political desire to raise as much revenue as possible.  For now, it should be linked to fuel excise duty, but not determined by it, after all it is South Australia's RUC, not the Commonwealth's.
5. Develop policies on distance travelled by location: Even if the approach taken is to use odometer readings as the basis for charging, South Australia cannot avoid having to not charge for distance travelled off public roads (as this is not subject to fuel excise duty now, albeit through a refund process) and out of state.  This obviously means it must be co-ordinated with Victoria and New South Wales in the first instance (very few electric vehicles are likely to venture into Western Australia or the Northern Territory), but electric vehicle owners ought to be able to have technology choices so they can choose an option that includes location - so they are not charged for out of state and offroad travel.  If they don't choose a location based option, then a manual refund process for out of state travel might be developed.  In New Zealand there is a manual option, but commercial vehicle operators using GNSS based telematics service providers do so, in part, to automate the offroad refunds process.  A bigger issue is what to do with out-of-state electric vehicles, which will be difficult to enforce charges against without a multi-state approach.
6. Decide if charges are prepay or postpaid: The IPA paper is silent on this, but it has considerable impacts on enforcement vs. flexibility. If distance is invoiced after the event, it is much harder to enforce and pursue for payment, than if it is prepaid distance, particularly using a manual method of distance measurement (odometers). Postpayment is suitable for those using automated means of distance reporting (e.g. in vehicle telematics systems), as it can be related to a prepaid account easily, but if you are dependent on motorists reporting distance manually, then there can be issues with managing this at scale.
7. Develop a scaleable enforcement system:  On a small scale, this wont be difficult because it is easy to chase small numbers of vehicle owners, but it becomes tricker when the numbers enter the tens of thousands of vehicles. Consider what parts of enforcement are around recovering charges vs. charge evasion and fraud, and how each are treated.  Legislation needs to be flexible enough to respond to what behaviour looks like when lots of people are paying RUC and especially when it involves vehicles paying at least some fuel excise duty.
8. Decide on a delivery model:  On a tiny scale, it can be done within the State Government, but over time this is unlikely to be a suitable model from the points of view of efficiency, user choice and innovation.  Enabling an open market in RUC service delivery is the model pursued in the United States and now in New Zealand, as well as parts of Europe.  This allows for new technology options to be developed, but more critically for the more complicated task of incorporating hybrid vehicles over time, which will need fuel duty refunds in parallel with RUC collection.

It is hugely challenging for South Australia to introduce RUC in around seven months, because the legislation needed will have to be able to adapt to a rapidly changing future. It would be a huge mistake to be confined to one single model for measuring and reporting distance, or to fail to apply the lessons of other jurisdictions, but with such a small scale of electric vehicles, it is effectively a pilot that is smaller than the programmes of other jurisdictions (e.g. Hawaii is currently piloting RUC with up to 2000 volunteers).

All I can say for now is get the policy right and communicate it well.  The world of RUC is strewn with failures from those who didn't do either. South Australia has a great chance to lead Australia on light RUC policy, but if it goes wrong, it will take years before it can try again. Ask the UK, it announced a policy to replace registration fees and part of fuel duty with a national road pricing system in 2006, and has never been able to seriously entertain it since over a million people signed an online petition against it in the subsequent two years.

• Comments from two pilot participants; and an
• Extensive interview with Reema Griffith, Executive Director, Washington State Transportation Commission.