Around the world, countries face various challenges in financing road infrastructure. Traditional revenue generation systems for construction, maintenance, and services related to road infrastructure are based on the idea of the use of fossil fuels as the main source of revenue for road transport. However, the success in reducing the use of fossil fuels in transport with more fuel-efficient cars and the growing energy transition has caused a decline in revenue, which is expected to further exacerbate in the coming years. The International Transport Forum (ITF), the transport-focused division of OECD, recently published a report that delves into these issues. The report highlights the need for a transition to sustainable alternatives to fossil fuels and recommends a range of low-carbon fuel technologies to achieve this goal.
The main results of the ITF's report
The ITF's investigation into the current state of road transport funding reveals several key issues:
- Tax revenues from fuel have decreased in many places: Electrification of car fleets and success in reducing fuel consumption leads to a long-term decrease in revenues from fuel taxes.
- Impact of climate policy: Commitments by many countries to phase out the sale of internal combustion engine vehicles (switching from fossil fuels) will further reduce these revenues.
- Need for a new approach to revenue collection: In response to the decline in revenue, new, efficient and fair tolls must be developed to maintain and build road infrastructure.
The ITF's recommendations
The ITF report suggests several measures to respond to the lack of funding for road infrastructure:
- Fuel tax reform: Continue fuel taxes on fossil fuel vehicles, ensuring they pay for carbon emissions and pollution.
- Mileage-based charging: Implement mileage-based fees, using simple methods such as odometer readings. This may initially apply to electric vehicles or all vehicles. Fuel taxes must be adjusted in parallel to prevent double taxation.
- Electric vehicle option: Offer electric vehicle drivers a choice between registration fees and distance-based fees.
- Congestion charges: Implement congestion charges in high traffic areas within urban areas to manage traffic efficiently and reduce social costs.
- Earmark revenue from traffic congestion: To increase public support for such charges, revenue from congestion charges can be earmarked to improve public transport and active modes of transport.
- Fees according to environmental costs: All drivers bear the full cost of their road use, which may include higher taxes in new toll systems.
- Prioritize different charges: Introduce distance-based charges to compensate for reductions in fuel charges. In the long term, work should be undertaken on the implementation of fees that vary by time of day and driving location. Such a system can offer more benefits.
- Adjust concessions: When the costs of electric and fossil fuel cars become comparable, concessions should be adjusted and greater emphasis should be placed on other vehicle
ITF Report
Our roads to the future
Roads to the Future is an information site concerning the implementation of a new unified system designed to charge for the use of road transport. The website uses data from The Icelandic Transport Authority, Statistics Iceland, the Ministry of Environment, Energy and Climate, the Icelandic Road and Coastal Administration, and the Ministry of Finance and Economic Affairs.