New Zealand has an opportunity to reform its transport system. Road pricing can help create a smarter, more efficient transport network across our cities and highways.

This week, the New Zealand Initiative released a new report, "Driving Change: How Road Pricing Can Improve Our Roads." It emphasises that the current system, heavily reliant on fuel excise duty (FED), is outdated.

There is a better way.

The report proposes comprehensive transport funding reform through "Smart Road User Charges" (Smart RUC). Vehicles would be charged based on how much they use the roads, when and where they drive, and the burden their type of vehicle imposes on the road.

The concept of road pricing is not new. Its intellectual lineage goes back to Adam Smith in the 18th century. Although our modes of transport have evolved dramatically since then – from horse-drawn carriages to electric cars – Smith's core principle remains as relevant as ever: those who use the roads should pay for them.

Smart RUC offers two main options for road users: an automated "pay-as-you-drive" system using an electronic distance recorder and pre-purchased distance licenses. This flexibility accommodates the diverse preferences and needs of road users. The goal is to create a fairer, more efficient system – not to increase costs for drivers.

The report proposes a gradual rollout over five years, allowing time for adaptation and avoiding the pitfalls of rushed implementation seen in other countries. A phased approach would give everyone – from government agencies to individual drivers – time to adapt.

Smart RUC offers several benefits. It sends clear price signals about the true costs of road use, charging all road users based on their actual use. It provides a stable, long-term funding source for our vital transport infrastructure. It also offers valuable insights into road user behaviour, enabling smarter investment decisions.

The report explores the questions of fairness, privacy, and technological feasibility in depth, concluding that the main challenge is not technical but political.

It is time for a shift in how we approach transport funding. Road pricing rests on strong intellectual foundations and has proven successful internationally.

Implementing a more robust road pricing system can help us change course and build a network that benefits everyone.

Are we ready to take the wheel?

Dr Matthew Birchall’s report, Driving Change: How road pricing can improve our roads, was published on 9 July