In NZ, we don’t have many diesel cars. They make up around 8.4% of the “light passenger vehicle” fleet,1 similar to Japan (where most of our cars come from) and the US, but much lower than most European countries. Diesel engines are more common for “light commercial vehicles”, i.e. small goods vans and trucks. They account for 68.9% of these vehicles. Overall, across the entire light fleet – defined as all vehicles under 3.5 tonnes – diesels make up 16.2% of vehicles.
Diesel light vehicles pay Road User Charges of $53 per 1,000 km including GST, or $46.08 excluding GST. This charge goes straight to the National Land Transport Fund, paying for road maintenance and construction (and a token amount to public transport and other things).
Petrol vehicles don’t pay Road User Charges. Instead, they pay an excise on petrol, which currently equates to 53.524 cents per litre, excluding GST.
As I’ve written previously, the Ministry of Transport estimates that petrol light vehicles have an average on-road fuel efficiency of around 10.1 litres per 100 km. So, to travel 1,000 km, petrol cars use around 110 litres, and pay $54.06 into the National Land Transport Fund. That’s quite a bit more than the diesels – 17% more per kilometre.
That’s not really fair, especially considering that diesel light vehicles tend to be heavier than petrol ones (since many of them are vans, light trucks, big SUVs etc), and so they do more “wear and tear” on the roads. Plus, the diesel vehicles travel further on average – 14,580 km a year vs. 10,850 for petrol vehicles.2
Overall, a light diesel vehicle, travelling 14,580 km a year, will pay $672 into the NLTF. An average petrol car doing the same distance would pay $796 – even though it does less damage to the roads it’s driven on. The difference is a bit over $100, which may not sound like a lot – but it adds up over hundreds of thousands of vehicles.
The government could level the playing field by lowering the excise for the many petrol cars by a tiny bit, or by raising Road User Charges for the fewer diesel vehicles by quite a bit. Given that there’s currently a bit of a funding issue for the National Land Transport Fund – thanks, Roads of National Significance! – there’s a strong argument for picking the latter option.
I emailed the Ministry of Transport to check the figures I’ve used above, and they provided the following additional context:
Until 1 July 2008, light diesel vehicles contributed more to the National Land Transport Fund (NLTF) per 1,000km than petrol vehicles, because a large portion of petrol excise duty was being directed into the Crown consolidated fund, while all road user charges revenue went into the NLTF. When the Government fully hypothecated petrol excise duty to the NLTF from 1 July 2008, this resulted in petrol vehicles contributing considerably more to the NLTF per 1,000km than diesel vehicles.
I would note here that, even pre-2008 when diesel vehicles were paying more into the NLTF than petrol vehicles, the petrol vehicles still paid more overall per kilometre – it’s just that some of those funds were diverted for other purposes. In 2008, the Labour government shifted transport funding towards more of a user-pays system (still not entirely user-pays), changes which I think makes sense, and which National also supported.
The Ministry of Transport also mentioned in their email:
The rates of petrol excise duty and light road user charges are slowly being brought together. However, this is a gradual process, as recent Government decisions have capped the maximum increase in any road user charges rate at around 10 percent for a given year. For example, on 1 July 2013, the rate of petrol excise duty increased by 3 cents per litre, or 5.9 percent. The rate of road user charges for light vehicles increased by $5, or 10.4 percent.
As such, it seems the government is well aware of the issue, but at the current rate, it will still take several more years before this long-standing imbalance is fixed entirely.
There are other equity issues around the excise vs. Road User Charges system – for example, with petrol cars, there’s a greater incentive to choose more fuel-efficient models – and I’ll look at those another time. These kinds of issues will become clearer if we ever end up moving to a universal Road User Charges system – which is quite possible, although unlikely to happen for a few years.
1 “2012 New Zealand Vehicle Fleet Annual Spreadsheet”, tab 8.1a,b,c, Ministry of Transport
2 My calculations using “2012 New Zealand Vehicle Fleet Annual Spreadsheet”, tab 3.1,3.2,3.4,8.3, Ministry of Transport