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 Document
He maramatanga tō tēnei whetū. He maramatanga anō tō tērā whetū Every individual has their own luminescence Find out more at hei-arataki.nz UARA OUR VALUES WHAKAPAKARI AKO MAHI TAHI IMPROVING OUTCOMES CAPABILITY DEVELOPMENT WORKING TOGETHER RANGATIRATANGA KAITIAKITANGA WHANAUNGATANGA MANAAKITANGA EMPOWERING GUARDIANSHIP AND COLLABORATION CARING FOR AND AND LEADING PROTECTION AND UNITY VALUING OTHERS
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
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
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)?
4 Te Manatū Waka | Driving Change: Reviewing the Road User Charges System 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?
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?
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?
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?
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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