Drivers who make the switch to an electric vehicle from a gasoline-powered car stand to save big on fuel spending. Roads, meanwhile, lose out on a revenue generating opportunity.
The rise of EVs has prompted an important question for U.S. policymakers: How should EV owners pay for use of the roads if they aren't contributing via the gas tax?
Nearly two years ago, then-California Governor Jerry Brown signed a road-funding bill, SB 1, that included a $100 annual registration fee for zero-emission vehicles. By the end of 2018, 21 states had adopted similar registration fees on electric vehicles in an effort to replace lost fuel taxes paid at the pump.
In the most recent example, Iowa transportation officials recommended state lawmakers establish a $130 annual registration fee for all-electric vehicles and a $65 annual fee for plug-in hybrid electric vehicles, beginning in 2020.
The California ZEV registration fee, which takes effect on July 1, 2020, was always viewed as an interim measure. Prior to the passage of SB 1, California had already launched pilots to test the viability of mileage-based alternatives to pump-based fuel taxes for the millions of gasoline cars already operating in the Golden State. It was assumed that if such a per-mile system were implemented statewide, EVs would be included as well.
A report released earlier this month by the Institute of Transportation Studies at the University of California, Davis (UC Davis ITS), requested by the California State Legislature, provides policymakers with recommendations on the optimal ways to collect road user fees.
For now, the report urges the adoption of a two-track system: owners of gasoline and diesel vehicles continue to pay fuel taxes at the pump, while owners of electric vehicles pay a mileage-based road user charge (RUC).
“The report strongly recommends consideration of alternative ways to fund road infrastructure,” said Alan Jenn, research scientist at the UC Davis ITS’ Plug-in Hybrid & Electric Vehicle Research Center and author of the report.
“The one we land on in the report as the most sustainable, and provides some interesting potential options in the future,” he said, “is the use of a road user charge for electric vehicles that is a per-mile fee.”
EV registration fees not a sustainable solution
In terms of funding for infrastructure, the annual ZEV registration fee included in SB 1 “doesn’t quite make sense,” said Jenn. “It’s significantly lower than what the average Californian pays in terms of the gas tax every year.”
“As we think about this longer-term transition towards a much higher volume of electric vehicles, the sustainability of the revenue for infrastructure funding is going to decrease,” he added. “From the goal of repairing the road infrastructure funding, it doesn’t do a good job.”
Jenn’s research also indicated that the registration fee could slow EV adoption. UC Davis ITS researchers surveyed several thousand EV owners in California about how their purchasing decisions might have been affected had a registration fee been in place when they bought their plug-in vehicles.
The responses, combined with a separate econometric analysis of EV sales in states that have adopted registration fees, showed a decline in future EV sales could be expected.
“Both of those show that there is an impact of a decreasing adoption of anywhere between 10 and 20 percent in the short run,” said Jenn.
There is also the issue of fairness. A flat registration fee, detached from driving activity, would create two unequal systems.
“Someone who could be driving 20,000 miles versus 10,000 miles would be paying twice as much with the gas tax but would be paying exactly the same with the registration fee,” Jenn noted.
The two-track system
Jenn settled on the two-track system — the status quo for gasoline cars, a mileage-based fee for EVs — in recognizing the administrative and technological challenges involved with transitioning to a per-mile fee for California’s large existing fleet of gasoline cars.
He observed that in Oregon, where volunteers can opt into the OReGO program, drivers pay a 1.7-cent per mile road user charge but still pay fuel taxes when they fill up at the pump. A crediting system then trues up the difference between what is paid at the pump and the mileage-based fee logged by the vehicle.
“From a practical standpoint,” Jenn said, “it might be a lot easier to implement a RUC for a smaller of subset of vehicles, such as electric vehicles.”
That’s not to say it’s inconceivable that gasoline and diesel vehicles could eventually shift to a mileage-based system.
New vehicles, gasoline or battery electric, come equipped with advanced computing technology, including telematics systems. Many existing gasoline cars would have to be outfitted with devices to track mileage for taxation purposes, as is the case in Oregon. Compatibility issues could lead to higher costs if not managed, said Jenn.
If automakers can “figure out how to standardize all of the requirements through the telematic system of the vehicle for EVs first, then that could conceivably be extended to internal combustion engines in the future,” he said.
Too early for EV road user fees?
But is it too soon to push for EV owners to “pay their fair share” for road use today? U.S. EV sales increased by 81 percent to 361,307 in 2018, but it’s still a nascent market, especially outside California.
“If we really want to see EVs replace ICE [internal combustion engine], then not making them pay road use fees is one kind of fairly painless incentive that can be offered,” Chris Nelder, a manager with Rocky Mountain Institute’s mobility practice, wrote in an email.
He added: “Making them pay the same as ICE essentially says both are equally valid from the perspective of social priorities, ignoring the externalities,” such as fossil fuel consumption and planet-warming pollution.