Last week, a flurry of reports surfaced suggesting that the government is once again considering the introduction of a road user charge—this time largely targeted at electric vehicles (EVs). The logic behind this proposal is straightforward: EVs don’t use petrol, diesel, or gas, and therefore don’t contribute to fuel excise tax revenue. A significant portion of this revenue is earmarked for road maintenance, upgrades, and new infrastructure. As EVs increasingly replace fossil fuel-powered vehicles (FFPVs), the revenue pool shrinks, potentially undermining our ability to invest in the road network.
This argument is not unreasonable. But it’s also incomplete. It fails to account that EVs bring substantial environmental benefits compared to FFPVs—benefits that are currently not explicitly acknowledged or rewarded. If anything, the fact that EV drivers do not pay the fuel excise tax could be seen as a modest offset for the broader environmental benefits their vehicles deliver.
Let’s unpack some of those benefits.
1. Reduction in Local Air Pollution
EVs produce zero tailpipe emissions. In many cases, this means significantly lower concentrations of nitrogen oxides (NOx), particulate matter (PM), and other pollutants near roads—especially in urban areas where traffic density is high and exposure is most harmful. While the effects of EVs on local air quality are not quite clearcut as it seems, and depend on many factors, it is highly likely that in an Australian context the improvment in air quality near roads attributable to EVs is significant. Cleaner air translates into better public health outcomes, reduced healthcare costs, and improved quality of life—none of which are factored into the current debate about road user charges on EVs.
2. Reduction in Noise Pollution
EVs are significantly quieter than their fossil-fuel counterparts, especially at lower speeds. The difference is not trivial—studies suggest a reduction of around 4 decibels in urban driving environments. This matters. Noise pollution is linked to stress, sleep disruption, and cardiovascular issues. Quieter streets are not just more pleasant—they’re healthier.
3. Reduction in National Greenhouse Gas Emissions
EVs contribute to decarbonizing the transport sector, particularly when powered by renewable energy. In Australia, many EV owners charge their vehicles using rooftop solar. This not only reduces emissions but also supports grid stability, especially if charging is done during peak solar generation hours.
So, what should the right policy response be? If EVs are delivering these environmental benefits, policy should reflect that. Instead of penalizing EV adoption with new charges, we should be thinking about how to recognise their positive externalities. Yes, we need to fund roads. But we also need to recognize that not all vehicles are equal in their environmental impact. A nuanced, forward-looking approach would balance revenue needs with environmental goals—and reward those who are helping us get there. If EVs are to be slapped by a road user charge, then FFPVs should be subject to environmental taxes on the local air pollutants they are emitting. I wonder if the government would be open to impose environmental taxes on petrol and diesel?