best practice governance government policy sustainability

Taxing electric vehicles

The State government intends to implement a 2.5 cent/km charge on electric and other zero emission vehicles, including hydrogen vehicles, and a 2.0 cent/km charge to plug-in hybrid-electric vehicles.

A knee jerk reaction to a broader problem and sends the wrong message.

The State government intends to implement a 2.5 cent/km charge on electric and other zero emission vehicles, including hydrogen vehicles, and a 2.0 cent/km charge to plug-in hybrid-electric vehicles. It argues that owners will continue to pay a fraction of the motor vehicle-related taxes and charges that other vehicle owners pay to encourage uptake, while still making a fair contribution to the cost of building and maintaining the road network Victorians rely on everyday. It also argues that revenue raised from this charge will enable the government to continue to invest in the road and transport network, including in new electric vehicle charging infrastructure and reforms to enable electric vehicle ready new buildings.

TfM has a number of concerns with this policy.

First, whilst electric vehicles will not be the answer to our transport problems (embedded energy/environmental costs associated with mining, processing of raw materials, manufacturing etc are significant, they still need to be charged and disposal at the end of the life cycle is problematic) they are a considerable advance on conventional motor vehicles as far as emissions are concerned and should be promoted. These vehicles are already expensive and a state government tax on them at this time sends the wrong message.

Second, vehicle registration and other taxes should be the principal funding source for road maintenance – not capital works and is an area that is already grossly underfunded. The condition of our roads has been a matter of grave concern for many years and will soon become critical.

As noted in the Auditor General’s report (Maintaining State-Controlled Roadways. Andrew Greaves, Auditor-General, 22 June 2017) :

“We rely on roads for access to work, schools, shops, recreational activities, health care and other services. Roads also play a critical role in the movement of freight and goods across Victoria. VicRoads manages about 24 000 kilometres of arterial roads.

Road networks in poor condition cost the community more, through increased fuel usage, vehicle maintenance costs and travel times. When road surfaces—referred to as road pavements—are in poor condition, they are also more expensive to maintain and repair.

The report concluded

“The increasing proportion of the state road network in very poor condition presents a growing risk to public safety and increases road user costs.

Not enough funding is allocated to road maintenance to sustain the road network, but VicRoads also cannot demonstrate clearly that it is making the best use of its existing maintenance funds.

Its approach to road pavement maintenance is reactive, with maintenance generally being carried out only when it becomes critical. Targeted early intervention to prevent roads from needing more costly and extensive maintenance has been limited. This approach has not kept up with the rate of deterioration of road pavements across the network”.

Little has changed since this report was written. Concerns tabled above are short term governance issues which must be addressed as a matter of course but raise more fundamental concerns for the longer term. Environmental change will force fundamental change in the way all societies live, and the imperative to consume less, and reduce waste, pollution and environmental degradation. From the transport perspective this means traveling and transporting less, less often and doing so more efficiently. This must be reflected in the way our roads are designed, used and managed.

The most appropriate policy response is therefore to manage them in a way that reflects these imperatives with “carrots and sticks”. Heavy vehicles, which do most of the damage to our roads should be taxed to reflect this and incentives provided to transport goods and services in a more efficient manner – such as by rail which is significantly underutilised, and by a range of other measures that reduce the freight and passenger task in the first place. Government should also use road infrastructure in a way that favours more efficient modes of travel such as road-based public and active transport (walking and cycling).

There also needs to be an appreciation that supplies of materials required for road maintenance are limited and this is becoming increasingly critical, particularly bitumen, concrete sand and aggregate. Government must respond by reducing the stock of infrastructure (contrary to public perceptions, Victoria has an abundance of road infrastructure, much of it overdesigned in terms of scale) and use what we have more efficiently instead of building more. As noted in the Auditor General report the cost of poorly maintained infrastructure is already high and a false economy which will end up costing the state government and the Victorian community dearly if it is not addressed soon.

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