When you take a trip in your vehicle, do you realise that you are not paying for the full costs associated with your travel? Climate change now provides an incentive to review this status quo.
Who pays for our vehicle use?
Vehicle users pay for New Zealand’s roads through petrol excise duty and road user charges. However, subsidies significantly reduce the cost to the user.
There are two main subsidies:
- Funding from taxpayers and ratepayers.
- Social and environmental impacts which are not fully paid for by vehicle users.
The impacts of the subsidies
Subsidies create vehicle travel demand and encourage urban sprawl. To cope with the increased traffic we have to allocate scarce additional funding to add more road capacity.
More vehicle use also means lower public transport patronage and higher subsidies to provide public transport for those without access to a vehicle.
Additionally, more vehicle travel also increases social and environmental impacts such as road crashes and trauma, and air pollution.
Reducing or eliminating the subsidies would be better for the planet and our health. The outcome would be less car dependence, more active travel and lower social and environmental impacts.
A high-level analysis estimates that fuel prices would rise by approximately 30% with the taxpayer and ratepayer subsidies removed. This would have a measurable long term effect of decreasing vehicle travel and its impacts.
Here are some examples of the subsidises. Next time you travel, think about how many apply to your trip.
1. Peak period travel is subsidised
Without congestion tolls, vehicle travel demand during peak periods is much higher and requires expensive additional road network capacity to be added to avoid gridlock. Taxpayers, ratepayers, and non-peak period travellers help fund these capacity increases.
2. Ratepayers subsidise free or under-priced on-street parking
Most on-street public parking is free or time-limited, with parking fees only applying to spaces in high demand. Parking revenue typically exceeds operational costs but only partially covers the total cost of providing and maintaining all on-street parking spaces.
3. Ratepayers subsidise local roading
Local roading maintenance and improvements are typically subsidised 40 % to 50% by ratepayers.
4. Walking and cycling facilities are subsidised by ratepayers
Highly engineered and costly walking and cycling facilities are subsidised 40% to 50% by ratepayers. Such facilities are required as a direct safety mitigation of vehicle speeds.
5. Some state highway improvements are subsidised by taxpayers
Some major roading project packages such as the NZ Upgrade Program are fully funded by taxpayers.
6. Vehicle air pollution is subsidised by taxpayers and the unmitigated impacts on people’s health
A high level analysis estimates the total annual social cost of motor vehicle related air pollution in 2018/19 is roughly $29bn. Vehicle users don’t contribute towards this cost.
7. Road crashes are subsidised by taxpayers and unmitigated impacts on people and families
The total annual social cost of crashes in 2018/19 was approximately $19bn. Vehicle users only pay a fraction of this cost through the ACC levy and vehicle insurance.
8. Water and soil pollution from road runoff are subsidised by the unmitigated impacts on the environment
Runoff from roads contains numerous pollutants from vehicle use. Runoff that is not fully trapped or fully treated enters water and soil ecosystems and negatively affect these receiving bodies and ecosystems once the concentrations are high enough. Vehicle users only contribute towards the costs of mitigating these impacts in some instances.
David Robinson
Associate Director, Transportation Planning