Codified Efficient Road User Charges Act
States have been experimenting for decades with a “road user charge” (RUC) as a potential alternative to the gasoline tax, but these pilot programs have typically only tested fixed charges per kilometer that do not take into account. pollution, weight, size, or other factors that the gasoline tax inherently takes into account because it takes more energy to move heavier, bigger and more polluting vehicles . Now California will show that there is a better way forward.
Thanks to Senator Wiener’s Senate Bill (SB) 339, the State Transport Commission will pilot not only another flat RUC, but also one that takes into account the efficiency of vehicles in order to better align with the objectives in terms of climate, air quality and equity. Senator Wiener amended his bill to incorporate vehicle efficiency in response to comments from the following groups:
- Clean Air Coalition
- Communities for a better environment
- Union of concerned scientists
- California environment
- Environmental Defense Fund
- Sierra Club
- California Cycling Coalition
Many assume that taxing vehicle miles traveled (VMT) is the only solution to stabilize transport financing revenues. However, a VMT tax (an RUC by another name) is just as likely to erode revenue as existing fuel taxes which are not indexed to both inflation and total fuel consumption. Whether a state relies on fuel taxes or a VMT tax to collect transport revenues, it must index both inflation and either the total fuel consumption or the total VMT to break the conflict between reducing fuel consumption / reducing VMT and collecting the income necessary for the maintenance of the transport system.
Almost 40 years ago, we began to break down the same type of conflict in the electricity sector by indexing utility tariffs to total fuel consumption through ‘income decoupling’, which automatically adjusts prices. up or down utility tariffs to ensure that utilities do not collect more or less than their allowable revenue requirement. In the 33 states where this solution is in place, it has definitely eliminated the conflict between raising the necessary revenue and seeking energy efficiency that reduces pollution and customer bills. There is no reason that the same type of accounting mechanism cannot work in the transport sector.
A flat RUC that is not indexed also does not reflect the âpolluter paysâ principle and removes the incentive for people to buy more efficient vehicles and drive them more efficiently. It is estimated that replacing the federal gasoline tax with a fixed RUC would consume an additional 5 billion gallons of oil per year, costing consumers around $ 12.5 billion and resulting in 45 million tonnes of oil. more carbon pollution every year.
A fixed RUC that assesses the same cent per mile charge on all vehicles also ignores the fact that larger, heavier and less efficient vehicles take up more road space and are disproportionately responsible for road damage. . A fuel tax (like gasoline tax) or RUC adjusted for vehicle efficiency better reflects the âuser paysâ principle, as more energy is required to move vehicles. bigger and heavier.
Oregon has piloted an RUC for almost a decade. The state effort provided important lessons and insights. However, with 1,300 volunteer vehicles, the program only generated $ 842.77 in net income, as it issued checks to drivers of vehicles that get less than 20 MPG to reimburse them for the money they have. spent on gasoline taxes on top of what VMT fees collect. According to the final program evaluation report:
The only reason the program has a positive balance is that there are slightly more vehicles in the program that get over 20 MPG, than vehicles that get less than 20 MPG.
In other words, the negligible net income of the Oregon pilot project depended entirely on volunteers with cleaner, more efficient vehicles entering into a pilot project against their own economic benefit.
If Rolls Royce, Hummers, Ferraris or other gas guzzlers had been allowed to continue signing up, the program would have lost money. And the amount of reimbursement checks increases with the amount of pollution from the association. If the program were to replace the state gasoline tax, it would no longer write physical checks for pollution, but the effect would be the same. This is the inherent deficiency of any flat RUC.
Fortunately, California will avoid the pitfalls highlighted by the Oregon experience and will not just drive another flat RUC, but will test how an RUC might be adjusted to account for the efficiency of the individual vehicle, based on miles per gallon (MPG) or, in the case of zero emission vehicles, the miles per gallon equivalent (MPGe) ratings published by the US EPA.
Aligning transportation revenue collection with efforts to improve fuel efficiency, accelerate adoption of zero-emission vehicles and reduce VMT helps all consumers save money and helps the most low and moderate income households. Analysis of 34 years of consumer spending found that improving vehicle efficiency benefits everyone, and low- and middle-income households save a greater share of household income compared to low- and middle-income households. high income. Improved vehicle efficiency provided middle-income families with up to $ 17,000 over the study period, despite households paying slightly more for new and used cars. equipped with fuel saving technology.
An RUC adjusted for vehicle efficiency could also prove to be a more sustainable and equitable alternative to the fixed and regressive costs of electric vehicles (EVs). Unlike typical vehicle registration fees, annual electric vehicle registration fees do not decrease to account for vehicle depreciation, but remain in full force for the life of the vehicle, hurting consumers. low and moderate income earners who buy used vehicles and need operating costs the most. the savings that electric vehicles can bring.
We thank Senator Wiener for modifying SB 339 to test this simple fit, allowing California to demonstrate how an RUC could be better aligned with climate, air quality and equity goals.