Can Pay-Per-Mile Driving Programs Work?

Transportation Secretary Ray LaHood got a spanking when he suggested one, but test programs have received positive responses from drivers. Like it or not, with gas tax revenue declining it may be the only option.

As vehicle fuel efficiency increases and hybrids become more popular, governments are running into a problem: they’re making less money from gas taxes. One solution that has been tossed around for years is the vehicle miles traveled (VMT) program, which charges people fees based on how many miles they drive. It’s a good way to both discourage driving and to put the tax burden of paying for roads on the people who use them most.

VMT initiatives have been implemented on a trial basis in the Netherlands, the United States, and elsewhere, but so far, no country or state has adopted a full-fledged VMT program, even though drivers who participate in pilot programs often support them (the programs could theoretically replace gas and vehicle taxes, as well as tolls). But it’s hard to imagine that these programs will succeed in the near future.

By all accounts, a VMT program should have worked in the environmentally aware Netherlands. The country implemented a six-month trial in 2009 in the city of Eindhoven, where participants were given an Internet- and GPS-capable vehicle device that logged fuel efficiency, route, and time of day—and provided instant feedback to drivers. At the end of each month, drivers were presented with a bill that took into account time driven and costs of use. Trial participants didn’t actually have to pay, but IBM found that 70% of drivers improved driving behavior by avoiding rush-hour traffic and opting to use highways instead of local roads.

The system was supposed to go nationwide in 2012, but it was nixed when a new government was elected in 2010.

Transportation Secretary Ray LaHood first expressed interest in a VMT program in 2009 as a way to raise highway funds. But there was an uproar and the DOT quickly backtracked on the idea, stating, "The policy of taxing motorists based on how many miles they have traveled is not and will not be Obama administration policy." The DOT did not, apparently, want to deal with a mob of angry motorists who were worried that their vehicles would be outfitted with tracking devices.

Despite the DOT’s backtracking, VMT programs have, in fact, been tested in the U.S. Oregon piloted a program in 2007, and ultimately concluded that it was Earier this year, a proposal in Oregon for a VMT charge exclusively for electric cars stalled in committee. Minnesota, Texas, and Oregon have all explored the idea, and Iowa is currently in the midst of a four-year VMT study. "I’ve heard that the test audiences really love [the Iowa program]," says Deron Lovaas, the NRDC’s Federal Transportation Policy Director.

But can these studies ever make it out of the pilot stage and into the mainstream? "The state and federal gas tax took about a century to evolve so that they
are at levels that fund reasonable state transport programs and federal
transport programs," says Lovaas. "The only popular tax is no tax. Therefore, this is going to take a while. We’re talking about a transition that will take decades."

There are a number of ways that a successful VMT fee could be implemented: recording mileage through the odometer, using more Big Brother-like GPS units, only charging trucks (Germany is doing this), or charging vehicles different different amounts based on efficiency (an SUV might be charged more than a Prius).

Regardless of what they end up looking like, the excitement for VMT fees isn’t going away, especially in the revenue-hungry U.S. "For the first time in a long time, we’re looking at declining gasoline consumption over time," explains Lovaas. "That’s going to reduce transportation investments even more than they have already been reduced." Something is going to have to fill the gap.

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