Finance Minister Proposes Charge on Clean-Energy Vehicles

driving in reykjavík

The Finance Minister has proposed a six-krona per-kilometre charge on electric and hydrogen vehicles for the upcoming year. A similar charge will be levied on hybrid vehicles. The objective is to increase the revenue of the national treasury and ensure that owners of clean energy vehicles contribute to infrastructure usage costs like other vehicle owners.

Declining tax revenues from clean-energy vehicles

Finance Minister Bjarni Benediktsson proposes a six krona per kilometre charge on electric and hydrogen vehicles for the upcoming year. The aim is to ensure that the owners of such vehicles pay the same fee for the use of roads as the owners of vehicles powered by fossil fuels. The proposal is open to public comment on the government’s consultation portal. The new toll system is expected to come into effect around the turn of the year.

As noted by RÚV, electric vehicle owners have enjoyed certain benefits from authorities in recent years in connection with energy transition plans. However, the proliferation of such vehicles on the roads has led to decreased tax revenues from vehicles and fuel use. The Finance Minister warns that without intervention, these revenues will continue to decline in the coming years. Concurrently, an imbalance has emerged in the current toll system between those utilising the transportation infrastructure.

At the same time, there is a significant need to build and maintain the country’s road network, a plan that is currently in progress. This need is anticipated to persist given the country’s growing population, burgeoning tourism, and related traffic. According to a statement from the ministry, the proposed per-kilometre charge will be applied to each vehicle and collected similarly to how service and energy companies charge for hot water and electricity supply to homes and businesses. (There have been suggestions that drivers would be responsible for tracking the distance they drive in a app, which would be verified at inspection stations.)

Two krona kilometre-charge for hybrid vehicles

Hybrid vehicles (passenger and delivery vehicles) will, as per the proposal, be charged a two-krona-per-kilometre fee next year. The deadline for submitting opinions on the proposals is set for October 16. Following this, the minister can present a bill.

According to the new draft budget of the government, there are also plans to introduce a per-kilometre charge on petrol and diesel vehicles. The existing tax system on vehicles and fuel will be reviewed. However, this will not be implemented until a year after the per-kilometre charge is applied to clean energy vehicles.

Hypothetical scenario to elucidate costs

After the Minister’s proposal was announced, RÚV performed a quick back-of-the-envelope calculation to estimate the cost of driving from Efstaleiti in Reykjavik (where the RÚV headquarters are located) to downtown Mosfellsbær; given that the drive is about 13 kilometres, the drive would cost 78 krona with the six krona per kilometre charge. Given this, residents of Mosfellsbær working in Efstaleiti would drive ca. 26 kilometres per day and pay ca. 156 krona. Over a five-day workweek, the cost amounts to ISK 780 or ISK 40,560 [$295/€280] on an annual basis.

Director of Road Administration in Favour of Tolls

Route 1 Iceland

Bergþóra Þorkelsdóttir, Director of the Icelandic Road and Coastal Administration, says she’s in favour of introducing tolls on roads throughout Iceland, RÚV reports. “…[I]t’s just my personal opinion,” she remarked in an interview on a morning radio program, “[but] I have a hard time seeing how a 350,000-person population in a country this big would ever be able to build up the [road] system without taking in any kind of funds, like road tolls or something of that nature, such that our guests are participating in the financing of it in some way.”

The idea to implement widespread road tolls was part of a bill introduced to parliament in December. Developed by the Parliamentary Environmental and Communications Committee in close consultation with Minister of Transportation Sigurður Ingi Jóhannsson, the planned tolls are meant to offset a loss of income from gas and diesel taxes, which are expected to fall rapidly over the next few years due to the government’s environmental action plan. The tolls would not be collected via booths; rather, cameras installed at specific toll points along the road would record license plate numbers and charge drivers electronically. The hope is that the camera tolls would not disrupt the flow of traffic.

“The additional stress that’s on the system comes from people who come here and want to use it,” said Bergþóra. “And I really think that these tourists who want to come here are prepared to pay some kind of fee for using the country’s infrastructure.”

Hvalfjörður Tunnel Toll to End in September

It is expected that the toll collection in the Hvalfjörður tunnel will cease by the end of September, Skessuhorn reports. The tunnel, which opened on the 11th of July, 1998 at a cost of 70 million $, has greatly shortened distances for drivers since opening. The private company Spölur is now finishing its last tasks, such as cleaning the tunnel along with regular maintenance. Barring any last-minute changes, the company will hand over the reins of the tunnel to the Icelandic Road Administration by the end of September, 2018.

Original plans projected that it would take around 20 years to recover the costs of building the tunnel through toll fares. The private company Spölur has handled the collection of the toll fares hitherto, as well as taking charge of all repairs and security in the tunnel. Traffic volume has been significantly higher than originally projected, so it has been clear for some years that the tunnel has been paid for. There were even plans afoot at one point to construct another tunnel through the fjord, which would allow traffic in opposing directions to be separated.

The Icelandic Road Administration will now take over the reigns of the tunnel. The previously manned toll booths are expected to be unmanned now, and security will be controlled from The Icelandic Road Administration offices. “The only difference will be that security monitoring will not take place in the booths next to the tunnel, but rather in the monitoring stations of the Icelandic Road Administration in Borgartún, Reykjavík or in Ísafjörður”, G Pétur Matthíasson, the public relations officer of the Icelandic Road Administration commented.

The tunnel cuts through Hvalfjörður fjord, just north of Reykjavík. Previously, drivers had to undertake the arduous trip into the long and winding Hvalfjörður, which was often deemed unpassable due to weather conditions. The time it took to pass through the fjord was shortened from an hour to 7 minutes. The Hvalfjörður tunnel is part of Route 1, and is 5 770 metre-long in total, reaching a depth of 165 metres below sea level.

Those drivers heading to West Iceland, the Westfjords, or the North of Iceland can expect their purse to hurt a little less during their trip to Iceland. Spölur will soon start work to clear up all toll fare subscription accounts.

The toll rates had previously been 1000 króna (9.22 $, 7.98 €) for passenger vehicles. Further information can be found on Spölur’s website – www.spolur.is, as well as the website of the Icelandic Road Administration – www.road.is