Secretary Peters: Tipping Point

For most of the past century, fuel taxes, regardless of how they have been spent, seemed to provide the right amount of revenue and were dead easy to collect. Today that picture is changing. The amount of tax collected is declining in relation to the funding demands of building and maintaining roads. You likely know the long-standing reasons: it is politically unpopular to raise fuel taxes, more efficient engines take heavier vehicles longer distances while consuming less fuel, and capital and operating costs of roads are steadily increasing.

Newer pressures to clean up our emissions and devise alternate power sources exacerbate the problem, and now it is becoming evident to more transport ministers that the fuel tax is a root cause of congestion. No longer a question of whether governments should collect more tax, it is now a question of which they should collect.

In this perfect storm, how can the fuel tax survive?

In the spring of 2004, British Transport Secretary, Alastair Darling went on record as the world’s first Transport Minister to formally propose a move from fuel taxes to road user charging. He proposed a satellite-based, nation-wide, variable time, distance and place charge. Motorists would pay by the mile, depending on where and when they drove. He called it “a radically different approach”.

And a radically good one, too. Tax shifting is the most powerful underused tool in the arsenal to fight environmental degradation according to Donna Morton, Executive Director of the Centre for Integral Economics.

At the time, Professor Stephen Glaister of Imperial College, London, one of the panelists that produced the precedent feasibility report, cited concerns for the sheer scale and expense of "an astronomic IT exercise", the difficulties of locating vehicles among tall buildings and the possibility of jamming weak radio signals.

It is now four years later, and not only is satellite tolling (GNSS) still seen the right approach, but that assumption has grown more accepted, almost self-evident. Long-time British thought-leader, Ian Catling, has grown impatient with EU governments’ lack of appreciation for GNSS interoperability – a critical attribute that removes an important barrier to the universal use that is needed in order to replace fuel taxes.

In those four intervening years technology has improved and countries such as the Dutch, Danish, British and others have been testing it. Each year GPS-metering reliability has improved to the point where the Transport Minister of the Netherlands, Camiel Eurlings, and his country’s Parliament have decided to proceed with their National road pricing system, Kilometerprijs, to deploy over the five years starting with 2011. Granted, their Parliament backed away from wholesale replacement of the fuel tax and will remove a few fixed vehicle taxes such as registration, instead, but the fuel tax has so safe haven there. Once the system to collect universal usage fees is in place, motorists will lobby to have the older tax removed in favour of the fairer and more effective distance charge. Only the minority who travel farther than average benefit from the fuel tax – and the environment always suffers from it. The more that taxes are skewed toward taxing road consumption and away from taxing fuel consumption the more effective is our lever on congestion.

The single substantive argument for the fuel tax, as put forward by Steven Norris (President of UK ITS) and Jack Schenendorf (Co-Chair of the US-DOT National Surface Transportation Policy and Revenue Study Commission), is that it is very easy to collect and that, they assume, no other technology could match its low operating costs.

Fortunately for the ministers who see beyond easy collectibility, that technology is now here – and several companies are perfecting it. It will soon be possible to collect road-use charges in a reliable and private manner, using a mobile, GPS-based technology that will be distributed and managed in exactly the same way that current mobile telephony is managed. Indeed this will have the side benefit of bolstering that industry in regions where mobile telephony services are saturating.

So with the two ministers mentioned earlier and Singapore’s Minister Raymond Lim decreasing vehicle taxes while raising road-use charges, the perfect storm described above, and the dawning of a technology to provide low-cost collection of road user charges, what a propitious time for Mary Peters, Secretary, U.S. Department of Transportation, to join the line of transport ministers who see that the fuel tax is the problem. Because of her county’s size and influence, her stance represents a tipping point.

I recently lauded the Secretary for her refusal to endorse her Commission’s Report: “Toward a New Surface Transportation Economic Model” because of its over dependence on fuel tax escalation. Now she’s released a white paper that beautifully details the several faults of fuel taxes – its ineffectiveness at reducing congestion, its inefficient use of resources, its unsustainability, and its unpopularly compared to effective alternatives. To have a Transport Minister write this, rather than a tweedy economist in a think tank, makes a huge difference.

Peters proposes to solve the problem with “direct pricing of road use, similar to how people pay for other utilities”. She outlines the three major policy objectives that it achieves: [1] the reduction of congestion and delivery of substantial economic benefits, [2] generation of “revenues for re-investment in precisely the locations that need the investment most”, and [3] the reduction of emissions of carbon and traditional pollutants.

It has been difficult to watch the rise and fall of the UK’s National Road Pricing program. It has been a consolation that the Dutch have now risen to the challenge, but the size of The Netherlands didn’t turn heads as did the UK. And Singapore is so far ahead the pack that we don’t dare compare ourselves.

The United States’ joining this movement will hasten the biggest shift in world surface transportation since trucks replaced rail after the Second War.

Thank you, Secretary Peters!