What's the objective of the COAG Road Reform Program?

The Council of Australian Governments (COAG) has identified two key objectives:

• Promote more efficient, productive and sustainable provision and use of heavy vehicle infrastructure
• Ensure that national heavy vehicle road prices promote the efficient, safe and sustainable use of infrastructure, vehicles and transport modes.

The COAG Road Reform Plan (CRRP) is charged with investigating and reporting on a feasible heavy vehicle pricing and funding system that would enhance efficiency and productivity.

 

How will CRRP best achieve COAG’s objectives?

To best achieve COAG’s objectives, CRRP will need to consider options that promote the right vehicle and road use choices, efficient infrastructure provision and appropriate road access arrangements for heavy vehicles.
The CRRP feasibility study will consider reform options for:

• Heavy vehicle road pricing– to investigate road use charging that more accurately reflects the cost to build and maintain the roads heavy vehicles use. Road user charges based on a mass, distance and/or location may encourage freight to be moved at the lowest overall economic cost – using the right vehicles and network of roads.
• Road funding – to link costs of heavy vehicle road use back into funding of roads. Funding reform should provide incentives and accountabilities to road providers that encourage efficient spending decisions on road investment and maintenance.

Why do we need heavy vehicle road reform and how does it fit into the bigger picture?

The COAG Road Reform Plan (CRRP) is part of the 2006 National Reform Agenda designed to deliver significant economic and social benefits by improving productivity, increased labour force participation and improving the standard of living of Australians.

In 2006, the Productivity Commission conducted an inquiry into road and rail freight infrastructure pricing. The inquiry found that current heavy vehicle road pricing and regulatory arrangements do not support the efficient use of the road network and the development of transport infrastructure, and this increases costs to both industry and government. The inquiry concluded that prices are highly averaged and do not always reflect the distance travelled, vehicle mass and the maintenance costs of different road types.

Following the Productivity Commission inquiry, COAG committed to a review of heavy vehicle pricing and the provision of roads to support freight. COAG asked the Australian Transport Council to investigate the feasibility of an alternative system of charging for heavy vehicles, where charges better reflect the factors that cause road wear and tear (such as mass, distance, location (MDL), and the revenue from these charges are better linked to road expenditure.

In 2009, COAG considered an initial report into key road reform elements, including heavy vehicle road use and costs. COAG determined that there was sufficient evidence to support a feasibility study.

 

What benefits are expected to be delivered through road pricing reform?

An efficient pricing system for heavy vehicles should reflect the full cost of road provision. More direct user charging will send appropriate price signals to the heavy vehicle industry to enable better vehicle selection and route choices.
Prices that reflect the costs of providing roads for heavy vehicles will encourage:

• An efficient trucking fleet mix (the right vehicles for the freight task)
• Better route selection for freight (using the right roads for the freight task)
• Efficient use of the road network (the right vehicle on the right roads)
• Efficient freight modal choices (road, rail or sea)

A new pricing system should be superior to the current PAYGO system which seeks to recover nationally averaged heavy vehicle related costs but does not provide efficient price signals in many situations. The development of a less distorting pricing system is consistent with the recommendations of the Productivity Commission and is a fundamental component of COAG’s brief to CRRP – as mentioned previously.

What benefits are expected to be delivered through road funding reform?

Funding reform options should be based on directing revenue collected from heavy vehicles to road providers to cover the costs incurred from road provision and use.
This will enable road providers to make efficient decisions about investment and maintenance and based on the needs of users, confident that they will recoup the costs they incur.
The benefits of funding reform could include the:

• Better optimisation of road network quality
• Reduction in vehicle operating costs – due to improved road conditions
• Reduction in the life cycle cost of roads
• Reduction of inappropriate access restrictions - with certainty of funding and knowledge of demand
• Efficient planning and road provision – more information means road providers could justify funding proposals and potentially secure funds by using information collected by MDL to prove use/damage
• Improvement of road expenditure accountability - due to more a transparent funding system.

What does CRRP mean for business?

Prices for heavy vehicle operators will reflect their use of the road network.

In addition, there should be improvements to the design and maintenance of key roads to reflect and match heavy vehicle use.

Resolving the funding and charging issues may also facilitate greater access for heavy vehicles to some roads which are currently closed to heavy vehicles.

In the long term – as productivity increases and the overall cost on heavy vehicle users decrease, benefits to the community should be realised as reduced freight transports costs flow through to lower costs of goods sold in the Australian market.

How will prices change as a result of heavy vehicle pricing reform?

The aim of the reform is not to increase overall revenue for the road providers, but to enable charges to match the impact of vehicle use on providing and maintaining roads. For example, if a form of MDL charging was implemented, impacts on heavy vehicle operators would depend on the distance travelled, the type of vehicle and roads used.
In considering the pricing options the feasibility study will analyse the potential impact on operators and consider whether it would be appropriate to make adjustments to prices in specific circumstances such as services to remote communities.
Prior to the implementation of any potential reform options, the costs and benefits will be examined and discussed with the wider community.

What is the timeline for the feasibility study?

The feasibility study recommendations will be submitted to COAG in December 2011 for COAG’s consideration.

June 2010
Stage 1:Development of the policy framework and key principles, objectives and criteria for all work streams. The interrelationships and sequencing of the work streams will be developed in greater detail in this stage

December 2010
Stage 2: Initial assessment of high level options for alternative models of road pricing and funding against the conceptual framework

June 2011
Stage 3: A summary of progress and detail charging options and key issues to be included in the final feasibility study report.

December 2011
Stage 4: Final assessment of key detailed pricing, business, legal and regulatory scenarios and refinement including alignment with the policy framework and objectives

How is CRRP consulting with the heavy vehicle industry and business community on the Feasibility Study?

Input from the heavy vehicle industry and business community is crucial in developing the feasibility study. It will assist the project team to make recommendations that are informed and which have considered stakeholder views.

Consultation will be through a range of activities including:

• Meetings of an industry advisory group involving heavy vehicle operators, logistics managers and business representatives.
• Presentation at industry conferences and forums
• COAG Road Reform Plan website – www.roadreform.gov.au
• Public discussion papers on a range of costing, pricing and road provision issues.
• Workshops with key stakeholders on discussion papers and other key issues
• Periodic meetings with key stakeholder groups

How can I get more information on the CRRP project?

For more information, please contact Renee Swanson, CRRP Communications Manager on:

Email: CRRP@transport.vic.gov.au
Telephone: (03) 9095 4455
Website: www.roadreform.gov.au