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Considering climate change, simplifying compliance and making better use of technology as our transport system changes - January 2022 Consultation ...
Considering climate change, simplifying
compliance and making better use of
technology as our transport system changes

January 2022   Consultation Document
Considering climate change, simplifying compliance and making better use of technology as our transport system changes - January 2022 Consultation ...
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Considering climate change, simplifying compliance and making better use of technology as our transport system changes - January 2022 Consultation ...
Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 1

                                                                                                         CONTENTS

Ngā ihirangi | Contents

Preface by the Minister of Transport         9        03
01                                                    Improving the RUC system for end users

Introduction                                          3.1 Reviewing the requirements for                    29
                                                          electronic RUC and mandating
1.1 Background to Road User Charges        11             eRUC for all heavy vehicles
    (RUC)
                                                      3.2 Using eRUC devices to improve                     30
1.2 What changes are needed to make        13             road safety
    RUC work more effectively?
                                                      3.3 Enabling partial RUC rates for                    32
1.3 We’d like your feedback on how to      14             vehicles that also use a fuel subject
    make the RUC system better                            to fuel excise duty
     Should there also be changes to       14         3.4 Enabling partial RUC rates for                    34
     Fuel Excise Duties (FED) settings?                   vehicles after RUC exemption ends
1.4 Additional sources of information      15         3.5 Exempting certain types of vehicles 35
1.5 Making and sending a submission        16             and vehicle combinations from RUC

1.6 The structure of this discussion       17               Extending the heavy EV RUC                      36
    document                                                exemption to 31 March 2030 to
                                                            support their uptake
02                                                          Exemptions for vehicle                          36
                                                            combinations where the motive
Using the RUC Act to do more than
recover road costs                                          power is from a vehicle exempted
                                                            from paying RUC
2.1 Including externalities in the costs   21
                                                      3.6 RUC for electric and diesel vehicles              37
    considered in setting RUC rates
                                                          with a Gross Vehicle Mass of less
2.2 Including impacts on greenhouse        23             than one tonne
    gas emissions when setting
                                                      3.7 Exempting low emission vehicles                   39
    RUC rates
                                                          from RUC based on distance
     There are risks with changing the     24             travelled
     purpose of RUC
                                                      3.8 Adjusting the overweight                          41
2.3 Including fuel type, origin, and       27             permit regime
    blend in RUC rates
                                                      3.9 Removing the requirement for                      42
2.4 Any other feedback on this chapter? 28                light vehicle owners to display
                                                          a RUC licence
                                                      3.10 Allowing for the purchase of                     43
                                                           RUC licences in amounts less
                                                           than 1,000 km
Considering climate change, simplifying compliance and making better use of technology as our transport system changes - January 2022 Consultation ...
2 Te Manatū Waka | Driving Change: Reviewing the Road User Charges System

CONTENTS

Ngā ihirangi | Contents (continued)

3.11 Removing the requirement to                      46        4.5 Clarifying the requirements that       65
     display other transport paper labels                           certain persons must make and
                                                                    retain certain records
3.12 Allowing the use of historic RUC                 48
     rates when carrying out                                    4.6 Clarifying the provisions relating     66
     an assessment                                                  to access to records held by
                                                                    third parties
3.13 Transitioning CNG- and LPG-                      49
     powered vehicles into the RUC                              4.7 Creating a requirement for RUC         67
     system                                                         Electronic System Providers (ESPs)
                                                                    to notify Waka Kotahi of the status
3.14 Assisting new RUC payers to                      50
                                                                    of RUC payments
     commence paying RUC
                                                                4.8 Clarifying the requirements            68
3.15 RUC offences and penalties                       51
                                                                    around the display of heavy
      Increasing maximum infringements 51                          vehicle eRUC licences
       and infringement/fine ratios
                                                                4.9 Exempting vehicles that are only        69
      Amending the non-payment                        54            travelling on a road for Certificate of
      penalty regime                                                Fitness purposes from paying RUC
3.16 Any other feedback on possible                  55         4.10 Extending an operator’s time to       70
     changes to the RUC system?                                      request an independent review of
                                                                     a RUC assessment
04                                                              4.11 Changes to how mobile cranes are      71
Technical amendments to the RUC Act                                  defined for RUC

4.1 Clarifying what ‘partly’ means in                 57        4.12 Any other feedback on this chapter? 72
    the definition of an electrically
    powered vehicle                                             05
4.2 Redefining RUC vehicles types for                 58        Annex 1
    eight axle combinations
                                                                Explanation for how road user              74
      Approach to clarifying vehicle types            59        charges rates are determined through
                                                                Te Manatū Waka Ministry of Transport
      Changes to RUC rates for H types                59
                                                                Cost Allocation Model
      for eight axle combinations
4.3 Changing the Warrant and                          62
    Certificate of Fitness requirements
    so the assessor must report
    evidence of odometer tampering
4.4 Clarifying the definition of                      64
    accurate for a distance recorder
    in a light vehicle
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Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 3

                                                                                                          CONTENTS

Table of questions

      What are the advantages                  20                What are the advantages and        26
 Q1   and disadvantages of using                          Q8     disadvantages involved in changing
      RUC to recover more than                                   the purpose of the RUC Act so
      the direct costs of building,                              that climate policy generally,
      operating, and maintaining                                 or greenhouse gas emissions
      the land transport system?                                 specifically, can be considered
                                                                 when setting RUC rates?
      If RUC should not be used for            20
 Q2   recovering more than road costs,                           What advantages and                            26
      what alternative approach might                     Q9     disadvantages would there be if
      be appropriate for recovering                              there was an explicit requirement
      those other costs?                                         to consider RUC exemptions as
                                                                 part of the development of the
      What advantages and                      22                Government Policy Statement on
 Q3   disadvantages are there to                                 land transport?
      considering externalities when
      setting RUC rates?                                       What are the advantages and       26
                                                          Q 10 disadvantages of enabling
      If externalities were to be              22              consideration of greenhouse gas
 Q4   considered, what criteria could                          emissions when setting RUC rates?
      be used to determine what
      externalities should be taken into                       How should the RUC rates be set                  26
      account in setting RUC rates?                       Q 11 for vehicles that could use more
                                                               than one fuel and these fuels
      If externalities were to be              22              had different greenhouse gas
 Q5   considered, how should these                             emissions?
      costs be set?
                                                               What advantages and                              26
      Would charges for externalities          22         Q 12 disadvantages are involved in
 Q6   be in addition to the current form                       using NLTF revenue to reduce
      of RUC, and potentially used to                          carbon emissions rather than
      address the externalities directly,                      foregoing RUC revenue?
      or be a core part of total land
      transport revenue?                                       What are the advantages and                      27
                                                          Q 13 disadvantages with the source of
      How would vehicles not paying            22              different fuel types being included
 Q7   RUC be affected?                                         in RUC calculations (separately
                                                               from the direct climate impacts of
                                                               the fuel used)?
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CONTENTS

       What are the advantages and                      27              What are the advantages and        33
  Q 14 disadvantages with the                                      Q 24 disadvantages of mandating
       environmental effects of different                               integrated telematics solutions
       fuel types being considered in                                   that could support improved
       calculating RUC rates for                                        productivity and safety
       vehicle types?                                                   compliance, either as part of eRUC
                                                                        systems or as standalone devices?
       How would fuel supply chains                     27
  Q 15 be verified?                                                     How can privacy concerns be          33
                                                                   Q 25 managed if we are going to make
                                                                        greater use of eRUC data?
       How could we ensure that, if                     27
  Q 16 different fuels are available (for                               What, if any, changes in costs    33
       example mineral and biodiesel, or                           Q 26 would additional requirements to
       hydrogen from different sources),                                allow eRUC devices to be used to
       only approved fuel types were                                    support improved productivity and
       used by the RUC vehicle?                                         safety compliance place on users,
                                                                        eRUC devices and eRUC providers?
        How else would you change the                   28
   Q 17 setting of RUC to ensure it is                                  What are the advantages and          33
        adaptable to future challenges?                            Q 27 disadvantages of enforcement
                                                                        authorities having greater access
       What are the advantages and                      31              to eRUC data for enforcement of
  Q 18 disadvantages of mandating                                       logbook requirements or other
       eRUC for heavy vehicles?                                         on-road enforcement tasks?

       What vehicle types should                        31              What are the advantages and          34
  Q 19 or should not be required to                                Q 28 disadvantages of allowing the
       use eRUC?                                                        RUC Act to set partial RUC
                                                                        rates to recognise FED paid
       How would phasing-in of eRUC                     31              by dual-fuel vehicles?
  Q 20 for the heavy vehicle fleet be best
       accomplished?                                                    According to what criteria should    34
                                                                   Q 29 partial RUC rates be determined?
       Are the existing requirements                    31
  Q 21 for eRUC devices reasonable if
       the technology was to be made                                    Should operators of dual-fuel        34
       compulsory?                                                 Q 30 vehicles with a reduced RUC rate
                                                                        still be able to claim a full FED
       What alternative technological                   31              refund if they used more fuel than
  Q 22 models should we be exploring                                    the average?
       for eRUC?
                                                                        What are the advantages and          35
                                                                   Q 31 disadvantages of enabling partial
       How would making eRUC                            31
  Q 23 mandatory affect your business?                                  RUC rates to help transition
                                                                        exempted vehicles to full RUC rates?

                                                                        What are the advantages and          37
                                                                   Q 32 disadvantages of the heavy EV
                                                                        exemption being extended for
                                                                        more than five years?
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Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 5

                                                                                                        CONTENTS

     How would extending the end date 37                     What changes should be made                      42
Q 33 be effective in encouraging the                    Q 42 to section 12 of the RUC Act
     uptake of heavy EVs?                                    to improve the overweight
                                                             permit regime?
     Should the current exemption        37
Q 34 be extended to 31 March 2030                            How would other potential                        42
     to encourage the uptake of                         Q 43 changes in this discussion
     heavy electric vehicles? Would an                       document, such as greater use
     alternative date be better and why?                     of eRUC, assist in the overweight
                                                             permitting process?
     How would exempting vehicle             38
Q 35 combinations where the motive                           What are the advantages and                      44
     power is from a vehicle exempted                   Q 44 disadvantages of removing the
     from paying RUC encourage the                           requirement to display a physical
     uptake of heavy electric vehicles?                      RUC label?

     What safeguards would we need           38              What problems for non-                           44
Q 36 to ensure that only trailers towed                 Q 45 compliance and enforcement
     by exempted vehicles were able                          might this cause?
     to be exempted?
                                                            How can Waka Kotahi assist drivers 44
     What are the advantages and             40        Q 46 in ensuring they remain compliant
Q 37 disadvantages of subjecting road-                      with RUC if the label-display
     registered very light vehicles that                    requirement is removed?
     are not powered by petrol to RUC,
     or a higher annual licence fee, for                     What are the advantages               44
     travel on public roads?                            Q 47 and disadvantages of retaining the
                                                             option to request a physical licence?
     Under what circumstances should         40
Q 38 ATVs and motorcycles primarily                          What advantages and                 45
     designed for use off road be                       Q 48 disadvantages are there in allowing
     required to pay RUC, or a higher                        RUC licences to be purchased in
     licence fee?                                            units of less than 1,000 km?

     What principles should we use to    40                 What are the advantages and                       47
Q 39 determine a RUC rate, or higher                   Q 49 disadvantages of removing the
     annual licence fee, for motorcycles                    requirement to display physical
     and mopeds?                                            vehicle licence (‘rego’) labels?

     Is having a GVM of less than one        40             How can Waka Kotahi assist drivers 47
Q 40 tonne an appropriate cut-off point                Q 50 in ensuring they remain compliant
     for treating ATVs separately? If                       with their vehicle licensing
     not, what is an appropriate cut-                       obligations if the label-display
     off point or other way of defining                     requirement is removed?
     these vehicles for RUC, and why?
                                                             What are the advantages and          47
     What are the advantages and       41               Q 51 disadvantages of retaining the
Q 41 disadvantages of a distance-based                       option to request a physical vehicle
     rather than time-based exemption                        licence label?
     to RUC for EVs?
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6 Te Manatū Waka | Driving Change: Reviewing the Road User Charges System

CONTENTS

       What are the advantages and                      48              On what basis should the penalty       54
  Q 52 disadvantages of letting Waka                               Q 62 for non-payment of RUC be
       Kotahi use historical RUC rates                                  calculated?
       when carrying out an assessment?
                                                                        What should be the maximum             54
       What are the advantages and          49                     Q 63 penalty for non-payment of RUC?
  Q 53 disadvantages of removing FED
       from sales of LPG and CNG and
       having all road vehicles using these                             Should the non-payment penalty    54
       fuels move to paying RUC?                                   Q 64 regime recognise the time the RUC
                                                                        payment has been outstanding?
       If LPG and CNG powered vehicles                  49              If so, how?
  Q 54 are included in the RUC system
       what reasons would justify their                                 What other improvements do             55
       operators paying a different rate                           Q 65 you think are needed in the
       than other light vehicles?                                       RUC system?

       If a partial rate is possible for dual- 49                       What criteria should be used to        57
  Q 55 fuel LPG or CNG vehicles, what                              Q 66 define, or replace, the word ‘partly’
       principles should be considered in                               in the definition of electric vehicles
       setting the rate?                                                and why?

       Are there any new issues that might 50                           What are the advantages and            60
  Q 56 need to be considered, including                            Q 67 disadvantages of our proposed
       those that might justify changes to                              approach to classifying vehicles
       RUC legislation, to address an influx                            with eight axle combinations?
       of new RUC system users when the
       light EV exemption ends?                                         What are the advantages and        63
                                                                   Q 68 disadvantages of requiring
       How should the RUC system help                   50              inspection of the odometer on RUC
  Q 57 new users purchase RUC from the                                  vehicles at the time of Warrant or
       exemption end date and from the                                  Certificate of Fitness inspection?
       correct initial odometer reading,
       after the exemption ends?                                        What form would this inspection        63
                                                                   Q 69 take and what would the costs of
       Should the maximum                               52              the inspection be?
  Q 58 infringements set out in section
       89(q) of the RUC Act be amended?                                 What should happen if a Warrant        63
       If so, how?                                                 Q 70 or Certificate of Fitness inspector
                                                                        thought an odometer had been
       Are the existing infringements                   53              tampered with?
  Q 59 set at appropriate levels for
       the offence?                                                     Is it necessary to define ‘accurate’ in 64
                                                                   Q 71 the RUC legislation, or can we rely
       Should the offender type ratios                  53              on existing case law and practices?
  Q 60 differ between individuals and
       body corporates? If so, how?                                     How could ‘accurate’ be defined        64
                                                                   Q 72 in RUC legislation for the distance
       Would you also change the fee/fine 53                            recorder fitted to a light RUC
  Q 61 ratio? If so, how?                                               vehicle?
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Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 7

                                                                                                       CONTENTS

     What should happen if a vehicle        64              What are the advantages and                      68
Q 73 owner finds that their distance                   Q 82 disadvantages of completely
     recorder is not accurate and does                      removing the requirement for
     not correct it?                                        carrying or displaying a RUC
                                                            licence for heavy vehicles?
     What are the advantages and            65
Q 74 disadvantages of requiring                             What are the advantages and                      69
     vehicle operators to retain                       Q 83 disadvantages of exempting off
     weight-based records?                                  road vehicles from paying RUC
                                                            if they are only travelling on a
     How long should any weight-based 65                    public road for the purposes of
Q 75 records be retained for?                               undertaking a safety inspection or
                                                            maintenance?

     What could Waka Kotahi do to           65              What are the advantages and         70
Q 76 make this requirement more                        Q 84 disadvantages of giving Waka Kotahi
     feasible for companies that create                     discretionary power to extend the
     weight-based records?                                  time for independent reviews?

     What are the advantages and            66              In what instances should an                      70
Q 77 disadvantages of allowing Waka                    Q 85 extension be granted, and in what
     Kotahi to access third party                           instances shouldn’t an extension
     records to ensure operator                             be granted?
     compliance with the RUC Act?
                                                           What are the advantages and        71
     What evidence threshold                66        Q 86 disadvantages of removing mobile
Q 78 or circumstances would be                             cranes from the list of vehicle
     appropriate for Waka Kotahi                           types that are exempted from RUC
     to trigger the power to access                        on the basis that all vehicles can
     third-party records                                   now fit eRUC devices?

     What are the advantages and        67                  What are the advantages and                      71
Q 79 disadvantages with RUC legislation                Q 87 disadvantages of amending the
     requiring ESPs to notify Waka                          definition of ‘All Terrain Crane’
     Kotahi of changes to the status of                     used in the RUC regulations to
     RUC payments?                                          allow for the use of single large
                                                            or single mega tyred axles rather
     What are the advantages and            68              than tyre contact area?
Q 80 disadvantages of removing the
     requirement for an electronic                          What other issues might there                    71
     distance recorder (ehubo) to also                 Q 88 be with the way RUC rates are
     display the RUC licence?                               calculated for mobile cranes?

     What requirements should the         68               What other technical amendments 73
Q 81 RUC legislation have around the                  Q 89 should be made to the RUC
     display of distance on an electronic                  Act, its regulations, or the rules
     distance recorder (ehubo)?                            and manuals that make up the
                                                           RUC system?
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8 Te Manatū Waka | Driving Change: Reviewing the Road User Charges System

CONTENTS

Further information

Table of figures                                                List of abbreviations

Figure 1: Main sources of revenue for the 11                    ACC         Accident Compensation Corporation
          National Land Transport Fund                          ATV         All Terrain Vehicles
          (NLTF) in 2020/2021
                                                                CAM         Cost Allocation Model
Figure 2: Diesel vehicles within the light 12
          fleet and percentage of revenue                       CNG         Compressed Natural Gas
          from light RUC                                        DME         Dimethyl ether
Figure 3: Indicative timing of proposed                15       eRUC        Electronic Road User Charge
          RUC legislation reforms                               ESA         Equivalent Standard Axle
Figure 4: Te Manatū Waka’s five                        19       ESPs        Electronic System Providers
          aspirational outcomes for the
                                                                ETS         Emissions Trading Scheme
          transport system
                                                                EV          Electric Vehicle
Figure 5: Example of combinations of                   38
          trucks towing heavy trailers                          FED         Fuel Excise Duty
Figure 6: Example of motor vehicle licence 46                   GVM         Gross Vehicle Mass
          indicating the information fields                     GVW         Gross Vehicle Weight
Figure 7: H Type Vehicle Configurations                60       HFCEV       Hydrogen fuel-cell electric vehicle
Figure 8: 2019/20 NLTP expenditure by                  76       HV          Heavy Vehicle
          cost category as percentage of                        LPG         Liquefied Petroleum Gas
          total RUC revenue
                                                                NLTF        National Land Transport Fund
Figure 9: Allocation of costs making up                77
          RUC rates for six common                              NLTP        National Land Transport Programme
          vehicle types                                         PCE         Passenger Car Equivalents
                                                                PHEV        Plug-In Hybrid Electric Vehicles
                                                                PV          Powered Vehicle
List of tables                                                  RUC         Road User Charge

Table 1: Costs per tonne of CO2                        25       VKT         Vehicle Kilometres Travelled
         emissions avoided through
         a RUC exemption
Table 2: Potential amount of revenue                   36
         foregone from different options
         for RUC exemptions
Table 3: Motorcycles, mopeds and light     39
         four-wheeled vehicles (ATVs) in
         the New Zealand fleet (July 2021)
Table 4: The maximum fees set out                      52
         in the infringement offences
         regulations
Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 9

Preface by the Minister of Transport

   New Zealand has a road user                          I am committed to improving our road user
                                                        charges system. This document outlines a range
   charge (RUC) system that is truly                    of options on how we can make our system of
   one of a kind – it remains world-                    road user charges more effective to overcome the
                                                        challenges and changes we will face in the future.
   leading as a distance and weight-
   based charge for both diesel and                     Many of the changes discussed here could
                                                        be significant for the RUC system if they were
   heavy vehicles.                                      implemented. This is why we are using this
                                                        discussion document to get your views before we
It is a well-established system having been             propose any legislative changes. The matters put
designed in the 1970s and undergoing a                  forward in this document are for discussion only
substantial reform in 2012 to modernise and             and are intended to seek feedback. All of the ideas
simplify it. The 2012 changes also enabled the          would need refinement before they could proceed
voluntary use of electronic devices (eRUC) to pay       and some may not proceed at all, depending on
road user charges for heavy vehicles. However,          your feedback.
since 2012 the transport industry has changed           We want to hear from vehicle owners, drivers,
significantly with a substantial increase in the        and industry experts to help us make well-
number of light diesel vehicles and as a result,        considered decisions and help shape the future
an increase in those paying road user charges.          of our transport sector. The consultation will be
The New Zealand transport industry is also facing       open until Friday 22 April 2022. I encourage you
the confronting challenge of climate change and         to share your views through the online survey,
a pressing need to reduce our transport sector’s        written submission or by getting in touch with
climate change emissions. Climate change is an          Te Manatū Waka Ministry of transport if you
area this Government is very passionate about and       want to discuss any of the proposals.
we are working hard to find solutions that can work
across the transport sector. Our uptake of electric
vehicles has increased and continues to do so with
the help of initiatives such as the current RUC
exemption and the Clean Car Discount announced
earlier this year. I am interested to see whether       Hon Michael Wood
we can make better use of the RUC system to help        Minister of Transport
promote the uptake and use of vehicles with low-
carbon emissions to help us meet our climate goals.
Although we currently have an exemption from
RUC for electric vehicles, once that exemption
expires, their operators will be required to pay
road user charges like other road users. This will
mean that they will contribute to the functioning
of our transport network that they are already
using. RUC means that, unlike many countries, we
already have a mechanism to recover these costs.
This doesn’t mean, though, that we shouldn’t look
at ways to make paying RUC simpler and easier.
CHAPTER   CHAPTER   CHAPTER   CHAPTER

   1         2         3         4

Introduction
Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 11

                                                                                                      INTRODUCTION

1.1
Background to Road User Charges (RUC)

      New Zealand was a pioneer                         In the 2020/21 financial year RUC contributed
                                                        nearly $2 billion in revenue to the National Land
      in implementing a national                        Transport Fund (NLTF) out of a total of $4.3
      distance-based road user                          billion. Of this the operators of the 800,000 light
                                                        RUC vehicles purchased approximately $800
      charge (RUC) system.                              million in RUC licences, while the operators of
                                                        the 190,000 heavy vehicles (including trailers
RUC imposes charges on RUC vehicles for                 towed by heavy vehicles) purchased $1.1 billion.
their use of the roads that are in proportion to        The owners of roughly 3 million light petrol
the costs that the vehicles generate. Since its         vehicles contributed around $2.1 billion in
introduction in 1978, RUC has been updated              FED and another $230 million was collected in
and simplified a number of times to allow for           registration and licence fees.
technological advancements and to modernise
the system. Today, our RUC system remains               Figure 1: Main sources of revenue for the National
world-leading, but it needs to evolve. It needs         Land Transport Fund (NLTF) in 2020/2021
to be able to adapt to changes in technology
and changes in the transport sector, such as the
increasing importance of light vehicles to RUC
revenue and the increasing use of fuels other
than petrol and diesel. We also want to consider
whether RUC should be able to address wider
Government priorities and not focus solely on
recovering direct costs.
Under the Road User Charges Act 2012 (RUC Act),                      50%                            45%
operators of all vehicles that do not use a fuel that
is charged fuel excise duty (FED) (primarily diesel
vehicles), or heavy vehicles with a gross vehicle
mass (GVM) greater than 3.5 tonnes (primarily
trucks, buses and some trailers), are subject to                                        5%
RUC. Currently, almost all RUC vehicles are diesel
powered vehicles, but vehicles using other fuels
such as electricity, hydrogen and biodiesel are also               Road user charges 45%
subject to RUC. Light Electric Vehicles (EV) (mainly                otor vehicle registration and annual
                                                                   M
cars) are currently exempt from paying RUC                         licensing fees 5%
until 31 March 2024 and heavy EVs (trucks and                      Fuel excise duty 50%
buses) are exempt until the end of 2025 as part
of existing measures to encourage people to buy
and use them.
12 Te Manatū Waka | Driving Change: Reviewing the Road User Charges System

INTRODUCTION

The last major suite of amendments to the RUC
Act were made in 2012. In the intervening years
the number of light diesel vehicles subject to
RUC has increased significantly and these are
often operated by private motorists, rather than
companies. Heavy diesel vehicles, which are
mainly operated by companies, remain the core
of the scheme, but are now only responsible for
around sixty percent of RUC revenue. Light diesel
vehicles, which now make up 20 percent of the
light vehicle fleet, contribute the other 40 percent
of RUC revenue. Once the EV RUC exemption
ends, owners of EVs will also pay RUC in ever
increasing numbers.
Figure 2: Diesel vehicles within the light fleet and percentage of revenue from light RUC

               45%

               40%

               35%

               30%
  Percentage

               25%

               20%

               15%

               10%

               5%

               0%
                     2000

                               2002

                                         2004

                                                   2006

                                                              2008

                                                                        2010

                                                                                2012

                                                                                         2014

                                                                                                  2016

                                                                                                           2018

                                                                                                                    2020

                                                                         Year

                            Light diesel vehicles (percent of light fleet)       Light RUC (percent of RUC revenue)
Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 13

                                                                                                     INTRODUCTION

1.2
What changes are needed to make
RUC work more effectively?

   The current RUC legislation is                      In addition to the potentially significant changes
                                                       to the purpose of RUC, we are taking this
   focussed on recovering the                          opportunity to consult on a wide range of other
   costs of damage to our road                         possible amendments to RUC legislation that
                                                       could improve its operation. Te Manatū Waka
   network, especially that caused                     Ministry of Transport (Te Manatū Waka) and Waka
   by heavy vehicles, and ensuring                     Kotahi NZ Transport Agency (Waka Kotahi) have
   that operators of vehicles that                     identified a large number of potential operational
                                                       and legislative improvements to the RUC system
   cause the damage pay the                            and RUC Act. Currently it costs Waka Kotahi
   appropriate amount.                                 approximately $20 million per year (around one
                                                       percent of RUC revenue) to administer the RUC
This approach remains key, but the current system      system and it costs operators an additional amount
does not recognise other costs imposed by vehicle      to manage their own compliance. Amending the
use, such as pollution or congestion. There is a       RUC Act and its regulations is an opportunity to
growing interest in using the RUC system to also       make changes that will reduce these costs and
capture some of those other costs, or to offset the    improve the value for money the sector gets.
higher costs faced by some emerging technologies,
ahead of their widespread adoption.
We want to look at whether changes to the
legislation are needed to enable our RUC system
to adapt to these changes in the types of vehicles
and their operators, and whether we should
amend it to accommodate future changes in
how we seek to raise land transport revenue.
14 Te Manatū Waka | Driving Change: Reviewing the Road User Charges System

INTRODUCTION

1.3
We’d like your feedback on how
to make the RUC system better

    This paper is designed to get                               We recognise that some of the changes discussed
                                                                are potentially large and complicated. We are
    your feedback on a wide range                               allowing a relatively long time for the consultation
    of potential changes to the                                 so that we can engage with stakeholders to
                                                                develop lasting solutions. This means that you
    RUC system.                                                 will also have an opportunity to make further
                                                                submissions before any changes to the legislation
If the changes are progressed, most would require               are made.
amendments to the RUC Act to enable them.
We will compile the responses we receive into                   We have allowed two months for written
advice for the Minister of Transport and his Cabinet            submissions, with written submissions due
colleagues about which changes might, or might not,             on Friday 22 April 2022. However, written
proceed. Cabinet will then consider proposals and               submissions will not be the only opportunity
any potential legislative changes – weighing up the             to have input. Stakeholder feedback is very
impact on the sector, the economy, and everyone                 important to us and we would like to engage
who uses or is affected by the RUC system.                      with groups on specific topics, either virtually
                                                                or in person (provided it is safe to do so under
Should Ministers decide to make changes                         the COVID-19 Protection Framework). If you are
following this consultation, we expect there will               interested in participating in a discussion on any
be several packages of amendments to the RUC                    of the proposals, please let us know by emailing
system (see Figure 3). The first package would                  RUCConsultation22@transport.govt.nz
include changes that can be made by amending
regulations under our existing law. These
changes can proceed relatively quickly after the                1.3.1 Should there also be changes to
consultation concludes. Other changes would                     Fuel Excise Duties (FED) settings?
require amendments to the RUC Act. The exact
timing of when those changes could be made                      At present, motorists using petrol pay for their
will depend on the timing of the parliamentary                  use of the road network through the amount of
process. The timing of these processes will not                 FED that they pay as part of their petrol. If we
be known until the final package of possible                    are to consider wider changes to the purpose of
amendments is prepared. Once the amendments                     RUC, then we may also need to consider if these
are in place there would then be another package                concepts or policies could also be applied to
of regulations to implement the remaining                       vehicles using petrol. For example, if the goal was
changes. These changes are likely to come into                  to reduce congestion it would not be sensible to
effect at the same time the new Amendment Act                   only charge operators of RUC vehicles. If you have
comes into force, or shortly after that. Finally,               views on how the FED system could be modified
there could be some changes made to the RUC                     to achieve the outcomes discussed in this
Act that would create the legal ability to do                   document for RUC vehicles, then you are welcome
something, but which we won’t want to implement                 to respond on these matters as well, when
immediately. These provisions might not be used                 responding to the questions in this document.
until some years from now.
Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 15

                                                                                                    INTRODUCTION

1.4
Additional Sources of information

      Annex 1 discusses in detail                     Figure 3: Indicative timing of proposed RUC
                                                      legislation reforms
      how RUC rates are calculated
      at present.
                                                               January –
                                                                                        Public consultation
Further information about RUC is also available                April 2022
on Te Manatū Waka’s website here:
https://www.transport.govt.nz/area-of-interest/
revenue/road-user-charges-system/                                                      Written submissions
and Waka Kotahi’s website here:                                                               close
                                                             22 April 2022
https://www.nzta.govt.nz/vehicles/licensing-rego/
road-user-charges/about-ruc/                                                          Package of measures
The RUC Handbook and Code of Practice for                                                 submitted to
Electronic Road User Charges Management                      August 2022                  Government
Systems also contains good background on the
operation of the RUC system:                                                               First batch of
https://www.nzta.govt.nz/assets/resources/                                            regulations proposed
road-user-charges/docs/road-user-charges-                      Late 2022                 for consultation
handbook.pdf
https://www.nzta.govt.nz/assets/resources/
road-user-charges/eruc-guidelines/docs/ERUC-                                             First regulations
code-of-practice.pdf                                                                     come into effect
                                                               Late 2022

                                                                                      RUC Act amendments
                                                                                         considered by
                                                                  2023                     Parliament

                                                                                      RUC Act amendments
                                                                                       anticipated to come
                                                               Late 2023                    into effect

                                                                                        Implementation of
                                                                                      regulations enabled by
                                                               Late 2023,
                                                                                      RUC Act amendments
                                                               early 2024

                                                                                          Light EV RUC
                                                                                         exemption ends
                                                            31 March 2024
16 Te Manatū Waka | Driving Change: Reviewing the Road User Charges System

INTRODUCTION

1.5
Making and sending a submission

      We welcome your submissions                               We are likely to publish a summary of
                                                                submissions. As part of consultation we collect
      on changes that the Government                            your name and any other identifying information
      is considering that relate to RUC                         you provide. If you do not want your name or
                                                                identifying information to be included as part of
      set out in this document.                                 the published public summary, please note this
                                                                at the end of your submission and we will ensure
Your feedback will help the Minister of Transport               identifying information is not included. This will
and his Cabinet colleagues to decide on what, if                also be taken into account when we respond to
any, amendments are made to the RUC system.                     any Official Information Act requests that cover
You can comment on as many or as few of the                     your submission.
items raised in the document as you prefer. You
do not need to respond to the questions directly                You have the right to ask for a copy of any
if you do not want to. They are only intended as                personal information we hold about you, and to
a guide. You can also suggest other matters that                ask for it to be corrected if you think it is wrong.
should be considered as part of this package of                 If you’d like to ask for a copy of your personal
reforms to the RUC system.                                      information, or to have it corrected, please contact
                                                                us at info@transport.govt.nz. If you are planning to
Please include the following information in                     make a submission via an online petition page or
your submission:                                                other automated platform, please contact us first
• The subject of the proposed change                            to ensure your submission is accurately identified
• Your name                                                     and collected.
• Your organisation’s name if applicable
• Your email address (preferred) or                             Submissions can be made after the closing date,
  postal address                                                but we cannot guarantee that these will be able
                                                                to be included in the formal submissions analysis.
You can send your submission via the
online submission form or by email to
RUCConsultation22@transport.govt.nz.
The online submission form is available at
https://www.transport.govt.nz/RUCconsultation22.
If you prefer, you can also mail a copy of your
submission to:
RUC Consultation 2022
Te Manatū Waka Ministry of Transport
PO Box 3175
Wellington 6140
Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 17

                                                                                                     INTRODUCTION

1.6
The structure of this discussion document

   We have set out this discussion
   document to guide you through
   the different levels of potential
   changes that could be made to
   the RUC Act.

Chapter 2 discusses ideas relating to the purpose
of RUC and the powers that are used to set RUC
rates. We are thinking about the scope of costs
we should seek to recover as part of RUC, what
the future RUC system could look like and what
powers the RUC Act needs if RUC was to be used
support wider transport policies.
Chapter 3 presents a range of changes to
improve the general functioning of the RUC
system. The ideas and concepts proposed for
your feedback focus on improving the collection
and administration of RUC and the use of RUC to
influence the national vehicle fleet. These changes
could affect most RUC users.
Chapter 4 sets out a range of potential, mainly
technical, amendments that are intended to
address specific issues we have encountered
through administration of the RUC Act. These
are mostly minor amendments which only
affect a small number of people or companies
and focus on changes to specific parts of the
current legislation.
CHAPTER   CHAPTER   CHAPTER   CHAPTER

   1         2         3         4

Using the RUC
Act to do more
than recover
road costs
Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 19

                                                                     USING THE RUC ACT TO DO MORE THAN RECOVER ROAD COSTS

    The transport system creates                                      costs and impacts of road transport when we set
                                                                      the costs of using the road network could help the
    significant social and economic                                   transport system become more effective; improving
    benefits but also many costs.                                     it as a system so that it enhances wellbeing and the
                                                                      liveability of our cities and towns.
For example: road transport is the fastest growing                    Te Manatū Waka has identified five outcomes
source of greenhouse gas emissions; by some                           (Figure 4) that the transport system should be
estimates, congestion costs Auckland alone up to                      placing at its centre to create a system that
$1.3 billion a year; and on average, someone dies                     improves wellbeing and liveability.2 Each of these
on our roads every day. A 2012 report1 found that                     outcomes has a variety of indicators, many of
air pollution from motor vehicles has a social cost                   which focus on the measurement of externalities.
of nearly $1 billion. Being able to consider these
Figure 4: Te Manatū Waka’s five aspirational outcomes for the transport system

       Inclusive access                                                                     Healthy and safe people
       Enabling all people to participate in                                                Protecting people from
       society through access to social and                                                 transport-related injuries and harmful
       economic opportunities, such as work,                                                pollution, and making active travel
       education, and healthcare.                                                           an attractive option.

                                                           A transport
                                                           system that
       Economic prosperity                                  improves
                                                          wellbeing and
       Supporting economic activity
                                                            liveability
       via local, regional, and international
       connections, with efficient                                                          Environmental sustainability
       movements of people and products.                                                    Transitioning to net zero carbon
                                                                                            emissions, and maintaining or
                                                                                            improving biodiversity, water quality,
                                                                                            and air quality.

                                                           Resilience and security
                                                           Minimising and managing the risks from
                                                           natural and human-made hazards, anticipating
                                                           and adapting to emerging threats, and recovering
                                                           effectively from disruptive events.

1 https://environment.govt.nz/assets/Publications/Files/updated-health-and-air-pollution-new-zealand-study-summary-report.pdf
2 https://www.transport.govt.nz/area-of-interest/strategy-and-direction/transport-outcomes-framework/
20 Te Manatū Waka | Driving Change: Reviewing the Road User Charges System

USING THE RUC ACT TO DO MORE THAN RECOVER ROAD COSTS

The Government is progressing policies to support
these outcomes by developing programmes
that focus on road safety, vehicle emissions,
regulatory development, and smart infrastructure
investments. The RUC system could also
potentially support these outcomes.
Currently the RUC legislation provides for the
setting of RUC rates to be in proportion to the
costs that the vehicles generate. These costs have
historically been limited only to the direct costs
of damage caused by the vehicles’ use of the
roads, along with the wider costs of building and
maintaining the transport system. In response to
the trends that we expect to impact the sector,
we are seeking your feedback on whether it is
appropriate to expand the costs that could be
taken into account when setting RUC under the
RUC Act.
The intent of broadening the purpose of RUC,
as set out in the Act, would be to ensure that
the Government can respond appropriately
and efficiently to the changing environment the
transport sector operates in.

          What are the advantages and
   Q1     disadvantages of using RUC to recover
          more than the direct costs of building,
          operating, and maintaining the land
          transport system?

          If RUC should not be used for
   Q2     recovering more than road costs,
          what alternative approach might be
          appropriate for recovering those
          other costs?
Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 21

                                                                      USING THE RUC ACT TO DO MORE THAN RECOVER ROAD COSTS

2.1
Including externalities in the costs
considered in setting RUC rates

    Road transport causes a                                             The Government Policy Statement on land
                                                                        transport 2021 made climate change a ‘strategic
    range of positive and negative                                      priority’. Decarbonising land transport is going
    impacts and these are referred                                      to be challenging and a comprehensive set
                                                                        of measures will be needed to achieve the
    to as externalities.                                                reductions recommended by the Climate Change
                                                                        Commission. We are going to need a wide range
These externalities can include environmental                           of incentives (and potentially disincentives) to
damage such as air or water pollution, noise                            move away from fossil fuels. The RUC system
pollution, road damage, accidents, or other harms                       could provide the Government with greater
such as congestion. Other than road damage,                             flexibility to manage the economic and equity
these externalities are not explicitly considered                       impacts of its greenhouse gas reduction
when setting RUC, or FED rates for petrol vehicles.                     commitments, while continuing to raise enough
We want to look at whether we should be able                            revenue to maintain the road transport network.
to consider some of these other costs when
setting RUC; especially those associated with                           Pricing externalities can recover these other costs –
greenhouse gas emissions. At the same time,                             fully or partially – by passing them on to those who
we need to ensure that we continue to raise                             created the costs. Managing externalities through
sufficient revenue for the transport system to                          pricing could be a fairer way to allocate costs
operate in a way that achieves our other                                and benefits of transport options and it could be
transport outcomes.                                                     used to influence travel or purchasing decisions.
                                                                        An example of using road pricing to affect
The transport sector is responsible for over                            externalities can be drawn from some European
21 percent of New Zealand’s gross domestic                              countries where discounts are offered on toll
greenhouse gas emissions and road transport                             roads to users who purchase cleaner vehicles in
is the fastest-growing domestic source of                               advance of the legal requirement to do so.
greenhouse gas emissions. Around two-thirds
of our transport emissions come from cars,                              New Zealand’s main taxes are income tax and
SUVs, utes and vans. Heavy road vehicles are                            GST, both of which are designed for revenue
responsible for around a quarter of transport                           generation. They are intended to be as neutral as
greenhouse gas emissions, even though they are                          possible and not change behaviour. In accordance
only responsible for six percent of the total annual                    with good taxation principles New Zealand favours
vehicle kilometres travelled (VKT) on our roads.                        taxation that is broad based, as it provides a
                                                                        sustainable revenue base and low administrative
                                                                        costs. This means that compared to most other
                                                                        countries, we make little use of taxes to deliver
                                                                        non-revenue objectives. Other than the Emissions
                                                                        Trading Scheme (ETS)3, only the problem gambling
                                                                        levy4 and tobacco and alcohol excise taxes are
                                                                        designed to influence behaviour.

3 https://environment.govt.nz/what-government-is-doing/key-initiatives/ets/
4 https://www.ird.govt.nz/duties/problem-gambling-levy
22 Te Manatū Waka | Driving Change: Reviewing the Road User Charges System

USING THE RUC ACT TO DO MORE THAN RECOVER ROAD COSTS

Using RUC to charge motorists for externalities
other than road damage would be a significant                                What advantages and disadvantages
                                                                   Q3        are there to considering externalities
shift in taxation policy generally and RUC policy
specifically. A wide range of matters would need                             when setting RUC rates?
to be considered to determine if this was the best
way to achieve policy goals. It would also raise                             If externalities were to be considered,
questions about how to address equity between                      Q4        what criteria could be used to
motorists paying RUC and those paying FED as                                 determine what externalities should
it would not be as easy to apply similar distance-                           be taken into account in setting
based charges to petrol vehicles. We would need                              RUC rates?
to decide if any charges for externalities were in
addition to the current charges, or if they were                             If externalities were to be considered,
only used to create discounts (such as the current                 Q5        how should these costs be set?
EV RUC exemptions). Alternatively, we would
change the way we calculate RUC to include new
elements, such as contribution to air pollution, in                          Would charges for externalities be in
the calculations. This might shift costs between                   Q6        addition to the current form of RUC,
users but not change the total raised overall.                               and potentially used to address the
We would also need to consider if the revenue                                externalities directly, or be a core part
from a component of RUC associated with                                      of total land transport revenue?
externalities would be ‘land transport revenue’.
Would it be part of the National Land Transport                              How would vehicles not paying
Fund (NLTF), spent on the transport system                         Q7        RUC be affected?
directly, or should it be allocated to a fund that
addressed the externality? For example, a charge
for noise pollution could be used to fund local
councils to install sound insulation in affected
houses near local roads.
Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 23

                                                                      USING THE RUC ACT TO DO MORE THAN RECOVER ROAD COSTS

2.2
Including impacts on greenhouse gas
emissions when setting RUC rates

    One of the key recommendations                                     Providing an exemption or reduced rate of RUC
                                                                       could help support and promote the uptake
    from the Climate Change                                            of new fuels. This assistance would be most
    Commission was for Government                                      relevant while the transition to low-carbon fuels,
                                                                       and to lower cost technologies, is occurring.
    to encourage the production                                        This assistance would most likely be through
    and use of low greenhouse                                          exempting vehicles subject to RUC (as happens
    gas-emissions fuels.                                               with EVs), or through charging a lower RUC rate
                                                                       than equivalent petrol or diesel vehicles, to
                                                                       offset higher operating costs. RUC exemptions
In addition to the existing temporary exemptions
                                                                       or reduced rates would most likely need to be
from RUC for EVs, the Government is already
                                                                       temporary, as with the current EV RUC exemption,
using a number of levers to assist the transport
                                                                       in order to minimise any long-term risk to the
sector to decarbonise. Its primary tool to reduce
                                                                       funding of the land transport system at a time
greenhouse gas emissions is the ETS, which puts
                                                                       when there are significant demands for investment.
a price on emissions by charging certain sectors
of the economy for the greenhouse gases they                           Because of their higher purchase and operating
emit. This applies to transport fuels.5 In addition,                   costs, there is increasing interest in broadening
it is investing in low emission vehicles through                       the use of RUC exemptions to other types of
government procurement of vehicles and the                             vehicles that use low-carbon fuels, such as
Low Emission Transport Fund6; and establishing                         hydrogen fuel-cell electric vehicles (HFCEVs).9
the Clean Car Discount scheme and the Clean Car                        This exemption is not possible without amending
Standard.7 The Government is also progressing                          the RUC Act, as only EVs charged from an
a Biofuels mandate.8                                                   external source of electricity are covered by the
                                                                       wording of the existing exemption. Extending
One of the main reasons to allow climate policy
                                                                       the exemption would not be consistent with the
or greenhouse gas emissions to be considered
                                                                       RUC Act’s purpose or current powers. It would be
when setting RUC rates is that vehicles powered
                                                                       possible to amend the RUC Act to add HFCEVs
by low-carbon fuels are currently more expensive
                                                                       to the definition of exempt vehicles. However, if
than their fossil fuel counterparts. They either
                                                                       we were to exempt HFCEVs, it could be better to
require the use of fuels that are more expensive to
                                                                       create a broader power to consider climate policy
purchase, such as biofuels, or require the purchase
                                                                       or greenhouse gas emissions when setting RUC
of new and more expensive vehicles, as in the case
                                                                       rates. This would avoid having to amend legislation
of EVs. In the case of hydrogen, both the vehicles
                                                                       if other technologies or fuels became important.
and the fuel are significantly more expensive than
diesel or electric alternatives. These costs are                       If the intent is to support technologies or fuels
expected to reduce as global production increases                      that are currently more expensive than existing
and technology matures, but at this stage that                         fuels, but which assist with reducing greenhouse
timing is very uncertain.                                              gas emissions, then we would need to consider
                                                                       whether RUC could be used to support the use of
                                                                       biofuels. Biofuels can be used in existing vehicles

5 https://www.epa.govt.nz/industry-areas/emissions-trading-scheme/industries-in-the-emissions-trading-scheme/liquid-fossil-fuels/
6 https://genless.govt.nz/running-a-business/co-funding-and-support/low-emission-vehicles-contestable-fund/about-the-fund/
7 https://www.transport.govt.nz/area-of-interest/environment-and-climate-change/clean-cars/
8 https://www.transport.govt.nz/area-of-interest/environment-and-climate-change/biofuels/
9 https://www.hiringa.co.nz/post/what-the-ruc
24 Te Manatū Waka | Driving Change: Reviewing the Road User Charges System

USING THE RUC ACT TO DO MORE THAN RECOVER ROAD COSTS

and provide significant reductions in greenhouse                            2.2.1 There are risks with changing
gas emissions over the use of conventional fuels.                           the purpose of RUC
While biodiesel and bioethanol (usually a petrol
substitute) can be used in pure (100 percent)                               Providing reduced costs for operators of vehicles
form they are more likely to be sold as a blend.                            using low-carbon fuels may be supported,
Biodiesel is often sold with a relatively low level                         especially by those receiving the benefit.
(five or seven percent) of biodiesel blended with                           However, we do not have good information on
mineral diesel. It is also likely that not all fuels                        how important the existing RUC exemptions
sold around New Zealand would include biofuels                              have been in promoting EV uptake, or what
or, if they did, that this would be at the same                             effect exemptions or discounts would have for
percentage in all retail outlets and all locations.                         supporting the uptake of other low-carbon fuels.
Given the likely usage patterns of biofuels, it is not                      This would need to be better understood before
clear if RUC could be used to support these fuels.                          further exemptions could be proposed and this is
You are welcome to provide feedback on whether                              why we are seeking feedback on this issue. There
RUC could support the uptake of biofuels.                                   may also be other opportunities where it would be
Looking ahead, there are also currently rare                                more efficient or effective to spend NLTF revenue
fuels that may become important and could be                                (that is, revenue from RUC and FED) directly to
appropriate to consider providing reduced rates                             reduce carbon emissions rather than forego RUC
or exemptions under a new RUC policy. These                                 revenue. Potentially a RUC exemption could also
include fuels such as dimethyl ether (DME)10,                               be treated as an expense under the NLTF and
a possible alternative to petrol that, under our                            subject to the same processes for approval as
current legislation, would require the vehicle                              other funding decisions, through the Government
owner to pay RUC (as the fuel is not currently                              Policy Statement on land transport.13 This would
subject to FED). In another case, bioethanol is                             ensure that the impacts of any exemptions on
the only fuel in New Zealand that does not include                          transport revenue were fully considered.
FED in its price11, and where the vehicle owner                             RUC exemptions and reduced RUC rates risk
does not have to pay RUC. Although ethanol is                               undermining the key principle of the RUC system;
normally used as a replacement for petrol,                                  that vehicle owners should pay for the use of
ethanol has been used experimentally as a fuel                              roads including pavement damage. They would
in diesel engines.12 If the ethanol was used in a                           also reduce the incentive to choose vehicle
heavy vehicle, the operator would be required                               combinations that minimise damage to the
to pay RUC.                                                                 road network.
As well as being used in fuel cells, hydrogen can                           Broadly, road users have accepted regular
also be used directly as a transport fuel as a gas in                       increases to RUC (and fuel taxes) as well as
specially modified engines. This use may still cause                        the idea that heavier vehicles should pay more
air pollution through the combustion process, but                           because they cause more damage to the roads.
can have very low carbon dioxide emissions.                                 This consensus is in stark contrast to other
Because other fuels and technologies may                                    jurisdictions where there can be significant
become important in the move to a low-carbon                                protests and unrest when fuel taxes are raised,
transport sector, a more general power to exempt,                           or where taxes have not been able to be raised,
or otherwise support, low-carbon fuels through                              often for decades.
the RUC system may be a better approach than
creating an additional exemption for HFCEVS, or
any other specific fuel.

10 https://innovationorigins.com/en/dimethyl-ether-instead-of-diesel-how-trucks-can-become-cleaner/
11 T
    echnically, ethanol is subject to FED, when used as a transport fuel, however the rate is set at zero cents. By setting the rate at zero it
   means that the fuel is not covered by the RUC Act. It was set at this level to promote its use as a biofuel.
12 https://www.scania.com/group/en/home/newsroom/news/2018/first-scania-bioethanol-truck-hits-the-road.html
13 https://www.transport.govt.nz/area-of-interest/strategy-and-direction/government-policy-statement-on-land-transport/
Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 25

                                                                          USING THE RUC ACT TO DO MORE THAN RECOVER ROAD COSTS

Some in the transport sector may not support                               the price of all transport fuels so accounting for
using RUC to provide discounts or exemptions                               them in RUC rates would duplicate costs.
because it would undermine the principles of the
                                                                           While the ETS plays an important role in meeting
RUC system, that vehicle owners should pay for
                                                                           the Government’s climate objectives, it will not be
their use of the roads. Wider use of discounts or
                                                                           enough to reach the net zero target. Meeting the
exemptions could also lead to a decline in funds
                                                                           Government’s targets will require a wider range
available for building and maintaining transport
                                                                           of responses because although the cost of the
infrastructure and the likelihood of additional
                                                                           ETS on fossil fuel use for transport is ten times
increased costs for other road users to offset
                                                                           what it was five years ago, the impact on travel
the expected revenue loss.
                                                                           has been minimal.
As well as offering a tool to support new
                                                                           The cost in foregone RUC revenue per tonne of
technologies through RUC exemptions or
                                                                           carbon dioxide avoided varies by fuel type and
discounted rates, there is a strong correlation
                                                                           vehicle weight. As shown In Table 1, the amount
between transport emissions and the distance or
                                                                           of revenue foregone per tonne of carbon avoided
vehicle kilometres travelled (VKT), when vehicles
                                                                           ranges from around $260 per tonne of carbon
are fuelled by fossil fuels. As a distance-based
                                                                           for a small diesel vehicle to over $430 per tonne
charge, RUC is a direct way to influence distance
                                                                           of carbon for a very heavy diesel truck.14 For
travelled and it would be possible to set RUC
                                                                           comparison the price of carbon in the ETS is
rates to also reflect greenhouse gas emissions of
                                                                           around $50 per tonne at present and is expected
the fuels being used. However, these are already
                                                                           to rise to around $100 by 2030.
addressed through the ETS which is included in

Table 1: Indicative costs per tonne of CO2 emissions avoided through a RUC exemption

                                                                                                           Two axle
                                                         Light petrol          Small diesel            diesel truck/         Very heavy
                                                            vehicle*         two axle truck          passenger bus     diesel truck with
                                                      (equivalent to            (GVM 9-12T,              (GVM > 12T,        two trailers
                                                        RUC Type 1)             RUC Type 2)              RUC Type 2)         (GVM 55T)
 Average travel (km per annum)                                 11,000                   20,000                50,000            150,000
 Fuel use (l/100 km)                                                9.5                      25                  40                  55
 Fuel used (L per annum)                                         1,045                   5,000                20,000             82,500
 CO2 emitted (T per annum)                                          2.6                    13.4                 53.5              220.7
 Cost of RUC (per 1,000 km)                                    $76.00                 $172.00               $315.00             $630.00
 Total RUC revenue foregone (per annum)                      $836.00                $3,440.00             $15,750.00         $94,500.00
 Cost per tonne of CO2 avoided                               $326.53                  $257.20               $294.39            $428.21
 (in foregone RUC revenue)

*Light petrol vehicle is provided as a point of comparison, showing indicative costs if they paid RUC.

14 h
    ttps://www.nzta.govt.nz/vehicles/licensing-rego/road-user-charges/ruc-rates-and-transaction-fees/
26 Te Manatū Waka | Driving Change: Reviewing the Road User Charges System

USING THE RUC ACT TO DO MORE THAN RECOVER ROAD COSTS

These costs are, to some extent offset by wider
benefits to the New Zealand economy through                                  What are the advantages and
                                                                   Q8        disadvantages involved in changing
increased quantities of fuels being produced in
New Zealand, such as electricity, hydrogen and                               the purpose of the RUC Act so that
biofuels. The increased use of low-carbon fuels                              climate policy generally, or greenhouse
is also expected to contribute to other benefits                             gas emissions specifically, can be
such as reduced local air pollution and potentially                          considered when setting RUC rates?
reduced noise pollution with EVs and HFCEVs.
                                                                             What advantages and disadvantages
Using RUC to provide support separately from                       Q9        would there be if there was an
the ETS may also cause issues where vehicles                                 explicit requirement to consider
can use more than one fuel, and these fuels                                  RUC exemptions as part of the
would have different greenhouse gas emissions                                development of the Government
which may be subject to different incentives. For                            Policy Statement on land transport?
example, some hydrogen fuel cell electric vehicles
can also recharge their batteries directly from an
electrical source, which makes them an electric                         What are the advantages and
                                                                   Q 10 disadvantages of enabling
vehicle under our current law. Should these
types of vehicles be considered hydrogen or                             consideration of greenhouse gas
electric vehicles?                                                      emissions when setting RUC rates?

RUC exemptions come at a cost in terms of                               How should the RUC rates be set for
reduced revenue for the NLTF. Any revenue not                      Q 11 vehicles that could use more than
collected (foregone), that is not offset by increased                   one fuel and these fuels had different
costs imposed on other RUC vehicles, will increase                      greenhouse gas emissions?
the pressure on the NLTF. The foregone revenue
will need to be balanced against the Government’s
                                                                        What advantages and disadvantages
existing GPS investment priorities that may                        Q 12 are involved in using NLTF revenue to
need to be deferred or delayed as a result of
                                                                        reduce carbon emissions rather than
the reduced revenue. We are interested in your
                                                                        foregoing RUC revenue?
views as to whether it would be more efficient or
effective to spend NLTF revenue directly to
reduce carbon emissions, rather than forego
RUC revenue.
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