EV owners could pay twice as much as hybrids with badly designed road user charge

A recent report from the McKell Institute highlights concerns that owners of full battery electric vehicles (EVs) could face road user charges (RUC) nearly double those imposed on hybrid car owners if current state proposals were adopted nationally. The NSW government’s suggested flat rate of 3 cents per kilometre for EVs contrasts sharply with the effective 1.7 cents per kilometre paid by a typical hybrid such as the Toyota Yaris, which still relies on fossil fuels. This disparity risks discouraging EV adoption at a time when governments aim to reduce emissions and fossil fuel dependence. The report criticises the flat RUC model as regressive and unfair, particularly for middle- and low-income earners who often live in suburban areas with limited public transport and longer commutes. It points to rapid EV growth in western Sydney and Melbourne’s west, where ownership rates are rising faster than in metropolitan centres. For these households, switching to electric vehicles is a crucial cost-saving measure, potentially saving thousands annually on fuel and maintenance, making an equitable charging system essential. To address these issues, the McKell Institute proposes a progressive, income-linked RUC system that would only come into effect once EVs constitute 30 per cent of the national fleet. Under this model, lower-income drivers would pay reduced rates, with concessions automatically applied through the tax system, while higher earners would pay more per kilometre. The report also suggests phasing out fuel excise charges as EV penetration increases, aiming for a fairer transition that supports emissions reduction without penalising those least able to afford it. Edward Cavanough, CEO of the McKell Institute, emphasises that a flat per-kilometre charge unfairly burdens families in outer suburbs who have fewer transport alternatives and longer driving distances. He warns that such a system could inadvertently incentivise continued use of fossil fuel vehicles, undermining government efforts to accelerate EV uptake. The report’s findings underscore the need for carefully designed road user charges that balance revenue needs with social equity and environmental goals.