Funding the future of transport

Upgrading the transport funding system in Aotearoa

Alex Dyer
12 min readSep 6, 2023
It seems that lately we’re only capable of making changes to the New Zealand transport system by using carrots. All the sticks have been burned.

The transport system in New Zealand is fundamentally flawed. Increasingly worse outcomes for society are being felt due to a stubbornly entrenched roads-heavy political legacy here. Options for changing course are choked by a funding model that relies on ever-increasing private vehicle use. Our society is stuck paying for its growing impact.


The New Zealand Ministry of Transport is exploring a new way of funding transport due to the inconvenient reality that electric cars do not consume a fuel that can be easily taxed. In responding to their public consultation, I was struck by how limited the current funding system is, and how ill-equipped it is to deal with the challenges of today, let alone the future.

By reforming transport funding, we can achieve a system that is fairer for everyone, and sustainably addresses the damage motor vehicles do to the roads, people and the environment.

Roads and driving are only a narrow aspect of transport and land use systems, yet car-centric development and a roads-heavy ideology perpetuates unaffordable and unsustainable outcomes. This limited approach to how we live and move about does not satisfy the varied mobility and wellbeing needs New Zealanders have. This is starkly obvious with the growing global boiling challenge.

As we look towards a new funding approach for our transport system, I feel strongly that the government must incorporate wider system challenges and limitations. It should move to a more resilient, equitable system of cost recovery and collective investment that works to create the future we want. Not one that just perpetuates the status quo, even if electric cars are slightly cleaner.

Based on a consultation submission guide

This article is based on recommendations captured by a submission guide I helped prepare on behalf of Cycling Action Network (CAN) in response to public consultation sought by the Ministry of Transport early in 2022.

Consultation promotion graphic.

The consultation sought feedback on, among other things; changes to

  • Road User Charges (RUC),
  • which vehicles RUC might apply to — including electric,
  • how to plan for steadily decreasing revenue from Petrol Excise Duty (PED),
  • eRUC (electronic Road User Charges — leveraging modern technologies such as GPS (global positioning system) and mobile data to more accurately account for driving activity).

A bit more context (from the submission guide):

In New Zealand, we pay a levy (undisclosed at the pump) when we buy petrol for our car. This is called Petrol Excise Duty (PED). If you don’t use petrol (e.g. you use diesel, or drive a vehicle heavier than 3.5 tonnes), you instead pay a Road User Charge. The charge is based on distance and weight, and the proceeds from both PED and RUC go towards things like maintaining the roads that you use and other transport infrastructure and operation costs.

Electric cars have been exempt from the RUC until 1 April 2024, to incentivise their uptake. If all goes well, over the next few decades most of the vehicle fleet in Aotearoa will be free from fossil fuels and will emit very few climate-harming gases. Great! But this is a very, very slow strategy compared to avoiding car journeys and transitioning to much less damaging mobility options sooner.

Even with 100% clean-running vehicles, there are numerous other ways driving harms people, communities and the environment. Accounting for the full costs of motorised vehicle use is critical if we want to realise a fair and healthy transport system. Without recovering the broader set of costs, the perpetuation of unintended, harmful consequences of more people driving more often is guaranteed.

The current system

Transport system funding in New Zealand depends heavily on driving, with taxes collected going into a resource called the National Land Transport Fund (NLTF).

A diagram showing how current charges on driving activity is fed into the National Land Transport Fund and spent on existing and new roads for the most part. It also shows how the public pays for the negative externalities of driving.

The NLTF is expected to enable the country to maintain the existing transport system and invest in enhancements, such as: safety improvements, greater resilience, better coverage, higher levels of service, and reduced congestion.

The system diagram above does not illustrate which institutions currently look after what.

Along with roads, Waka Kotahi is also tasked with supporting transport outcomes by way of the Government Policy Statement (GPS) prepared by the Ministry of Transport, and reviewed every three years. This is how the government of the day communicates its desired outcomes from investment in transport, while supposedly not directing delivery.

The cost of building and (especially) maintaining roads comes from the NLTF, and often means there is little budget left for traditional modes; walking and cycling, public transport, inter-regional passenger rail, and coastal shipping.

Comparing transport priority hierarchies. What we say we value (left) vs what we spend money on (right). Adapted from The City of Edinburgh Council City Mobility Plan 2021–2030

Because the NLTF is overly reliant on the income from driving, a reinforcing feedback loop is created. More driving = more roads = more driving = more roads ad infinitum. Reinforcing feedback loops can be useful, but also dangerous — depending on what they’re reinforcing.

There are also a variety of other funding sources that prop up transport associated costs:

  • Rates — a large proportion of local rates are collected to maintain and invest in local roads and streets. The way these contributions are allocated vary widely across the motu — reflecting the preferences of councils and rate payer politics.
  • Auckland Regional Fuel Tax — a levy paid by motorists who refuel in the Auckland region that is used to help cover the huge costs of transport required to keep Auckland moving.
  • ACC levies — a large proportion of these are used to fund the care needed for victims of road trauma incidences.
  • General taxation — Income, G.S.T., etc
  • Bonds, borrowing, tolls, value capture, etc — when there are not enough funds in the current system, or roads of some sort of significance are initiated by the government of the day.

There are also a large range of non-monetary ways New Zealanders pay for the transport system that are subsidised and effectively ignored.

About ‘externalities’

Externalities’ is a term used in economics to describe indirect costs or benefits to someone uninvolved that arise from the activity of another. Some externalities are beneficial to others (positive), and some are damaging or hurtful (negative); meaning others suffer indirectly. Adverse health impacts from second-hand smoke is a familiar example of a negative externality. The person smoking doesn’t pay directly for that consequence.

Some examples of the negative externalities of car dependency;

The new system should fully recover the ~$5B per annum cost of road deaths and serious injuries. The tragic, permanent consequences of deaths, physical injury, post-traumatic stress, prolonged grief, and other types of trauma resulting from road violence should bear a greater responsibility from users whose heavier vehicles predicate the likelihood of greater harm — especially to others — in the event of a crash.

Public Health
Public health is harmed by vehicle use in many ways. A key health concern from car dependency is the inactivity crisis (motor vehicle trips replace active trips). Inactivity exacerbates many non-communicable diseases with high mortality rates, for example; cardiac disease and cancer. High levels of car dependency contribute to social disconnection and isolation and resulting mental health harm.

All cars, electric and non-electric, create air pollution that is harmful to humans and animals through tire wear, road wear and brake pad abrasion. They also generate:

Land use
Private car transport has been enabling the creation and expansion of suburban sprawl, resulting in extensive wasteful roading networks. Local governments across the country are struggling to service the unaffordable upkeep of suburban sprawl.

Traffic congestion

The lack of choice in our transport system means our streets and roads are becoming increasingly overcrowded. More users, drivers, and bus passengers are becoming stuck more often — decreasing efficiency and productivity of the road system. The only effective way to mitigate congestion where it occurs is to invest in viable alternatives to driving private cars and trucks.

If everyone can more intuitively appreciate the direct and indirect costs of their motoring (i.e.: maintenance), people who want to drive may feel more agreeable paying a high price for their choice, and may more readily choose a healthier, less damaging mode more often.

The argument goes that there are also positive externalities of private driving, such as more efficient goods and services, economic activity, jobs (from road building and maintenance), etc. But I would argue that much of these activities could be performed in healthier, fairer ways. Also — pricing transport options fairly does not bar it from happening — but it is more honest about what it really costs.

How much driving costs

Based on current levels of driving in New Zealand with all vehicle weights averaged out, and how much we choose to assign monetary value to various things; we currently pay (per kilometre):

  • Road maintenance: $0.081.
  • Socialised subsidies (negative externalities) estimate = $0.6851.
  • Total = $0.766.

So, for a 10km private car journey — say: your commute to work — currently costs New Zealand roughly $7.66 in total, of which you would’ve paid directly $0.81. Everybody (including you) covered the remaining $6.85 in costs in indirect ways. If you drove an electric car you would have paid zero directly and everyone would’ve paid the full amount.

For a private car journey driving from Auckland to Wellington (~646 km) a fossil fuel motorist would currently contribute $52.33 to their impact and all of New Zealand would pick up the rest of the tab: $494.84!

While obviously simplified, these example dollar amounts help illustrate how much society subsidises the driving of private motor vehicles.

An equitable transport future

In a potential future funding system for transport, motorists (in private vehicles 500kg and over) would pay for repairing the damage they cause to the existing network of roads as well as for the broader expense of driving.

A diagram showing how the funding of transport might change to shift the full costs of driving to the users who benefit from the privilege of private driving. The charges to driving do not play a role in influencing the design and delivery of new transport infrastructure, which should have more freedom to leverage the full range of options that can better deliver well being and environmental outcomes. Options such as rail, public transport, sea, and walking and cycling.

Motor vehicles providing a public good, such as buses, and all road users whose loaded vehicle weight is lighter than 500kg would be exempt. Very light road users cause almost no damage and introduce very little danger to others.

Other sectors of government would have a means of recovering the costs they incur from private driving with rates reviewed and updated annually. This allows for a reduced pressure on currently socialised funding sources, such as rates, ACC, and other taxes.

Investment in the transport system for new infrastructure or services could be more freely directed to whichever mode or solution is best to prioritise for everyone’s long-term wellbeing. It could be under less pressure to pursue roads-centric outcomes. It could be more flexible to contribute to wider societal goals and aspirations.

In the future, general taxation dollars continue to cover a range of maintenance costs that originate outside of motoring — such as natural forces and disasters, safety upgrades and wear and tear from public transport vehicles.

Again — the proposed system diagram above does not illustrate which institutions would look after what. Suffice to say, the current balance of power and decision making is not sustainable. New arrangements are needed to move our transport and urban development infrastructure challenges to a healthier configuration. One that persists beyond volatile short term political cycles.

Transport decisions seem to play an outsized role in the political realm in Aotearoa. The political system here has, in recent decades, proven inadequate when protecting intergenerational needs of people and the environment. The power to decide on a sustainable, regenerative, healing approach to transport and land use planning should lie with a public institution, but one that is fundamentally directed by the long-term health and well-being outcomes of the people, and crucially; of future generations.

In Wales, there is now a Commissioner for Future Generations that validates the strategies and choices of other parts of their government are in the best interests of long term, intergenerational well-being and environmental health. Perhaps we need one in New Zealand, too.

More important aspects to consider

The above diagram for how a future transport system could be funded obviously does not capture all the complexity involved. Below are some other crucial aspects that will need to be carefully factored in:

  • Externalities claims must account for inflation
    Every year, inflation will impact the rate at which the costs of driving are calculated. Such costs need to reflect real-world value as closely as possible in an ongoing fashion.
  • Traditional transport modes face a multi-generational deficit
    As a nation, we have been under-investing in traditional modes of transport (walking, cycling, public transport) while over-investing in private motorised travel. How will an improved funding system approach correcting this?
  • The equity lens
    A transport system that has low car dependency and provides more choice is inherently more equitable. Care is needed, however, in transitioning people away from car dependent contexts and properly supporting accessibility needs.
  • Better systems must ensure robust road user data
    RUC is a more demanding process to administer as it requires more data than just how many litres of fuel were sold by a retailer. The extra complexity has resulted in nominal data quality, including variable honesty of users, and difficulty assessing the accurate weight of a vehicle when empty vs fully loaded. We will need to invest in better systems to ensure that quality data is making the charges people pay accurate and that the damage they cause is properly recovered.
  • Privacy
    The consultation run by the Ministry of Transport asked questions around privacy when introducing new technologies to support eRUC. While managing the privacy of individuals’ data is critical, we should not continue ignoring the fact that the activity of driving heavy vehicles in the public realm must pay fully for the privilege.

The potential benefits of users paying for the full costs of private driving

Recovering the full costs from the people who are directly benefiting from private driving is a more equitable way of arranging things in the current market-based economic system we live in. Instead of distributing corporate welfare for car corporations, and propping up private car dependency in an opaque manner throughout government departments, these subsidies need to be eliminated and the expenses recovered from the people actually incurring them. The user needs to pay.

As well as recovering the costs of negative externalities of driving, there can be many more holistic benefits for society.

  • We can better evaluate success based on environmental, long-term social and economic factors.
  • We can begin to properly re-balance the investment needed for rail, walking and cycling.
  • We can better realise key mobility synergies — such as the bike+train and walking+bus combinations, and more tight-knit walkable neighbourhoods and cities,
  • We can rediscover coastal shipping — especially sail — for another low-carbon, low-impact, high-volume mode of cargo transport.
  • False arguments, like: “drivers pay for the roads”, and “cyclists are free-loaders”, become redundant.
  • A wider range of people can access the places, people, and services they need and want with greater autonomy, and without needing to use a car or be driven, leading to healthier, happier social bonds.
  • More people will be able to engage in positive, meaningful personal actions towards a better future. One that helps others as much as it helps each individual.
Who’s going to do this?

At this critical junction in human history, if we do not take a broad, systems-aware approach to the challenge of maintaining and investing in our transport networks, the shortfalls from the currently limited system will re-emerge again, and again, as we keep trying to patch each new p̶o̶t̶h̶o̶l̶e̶ crisis that develops. We need more far reaching changes than fiddling with minor fuel tax adjustments or wholesale electrification of an intrinsically inefficient vehicle fleet.

The ways that Aotearoa’s transport system is currently funded is unfair and inequitable. It is deleterious to our long term well being. It subtly asserts that more roads, cars and trucks are inherently good for everyone and that everyone has no choice but to contribute to it.

This results in traditional modes of transport, such as walking, cycling, passenger and freight trains, and other public transport being treated as secondary, lesser considerations to the needs of private motoring.

We need a transport system that:

  • actively supports and delivers wellbeing outcomes for all New Zealanders
  • reinforces increasingly positive outcomes
  • is equitable and accessible to all ages and abilities
  • incorporates and prioritises the best outcomes offered by all transport modes
  • sets New Zealand on a more resilient footing — financially, socially, and environmentally.
  • creates feedback loops that reduce private vehicle use and makes road maintenance less costly over time
  • is increasingly free from fossil fuel use
  • maintains car use at a sustainable, intentional level

We need an actually sustainable governance system for transport decisions and infrastructure delivery that prioritises the environment, people, and future generations, not a single vehicle type.

So — let’s work to refine a more resilient, effective, transport system and focus on creating the real outcomes we want to see.

Who’s going to do this?



Alex Dyer

Passionate about healthy streets and cities for people. On Twitter as @AxleRyde