Revenue and Policy Implications from Emerging Fuel Sale Trends in Metro Vancouver, British Columbia, Canada

Abstract

Taxes generated from fuel sales represent an important source of revenue throughout North America and are broadly used with other sources to maintain and develop transportation networks and associated infrastructure. Historically, these taxes have performed well in providing a secure source of revenue. However, recent factors such as improved vehicle fleet efficiency and declining vehicle kilometers traveled (VKT) on a per vehicle and per capita basis affect the volume of fuel sold and threaten the security of existing sources of revenue generated from fuel taxes. Notwithstanding the obvious environmental benefits to which these factors contribute, a need remains to ensure that revenue streams are able to keep pace with funding requirements, given that auto ownership continues to rise, which places pressure on total VKT. The result is a decoupling of road usage and the main source of road user payments. The traditional solution to maintaining or growing revenue streams in the region of Metro Vancouver, British Columbia, Canada, has been to increase the fuel tax. However, the decoupling problem is intensified in the region because of the proximity to the border with the United States, where fuel price differentials are placing pressure on such solutions. This paper explores a number of recent trends that affect fuel sales in Metro Vancouver. Revenue implications are outlined, and policy recommendations are made to strengthen the link between road usage and road user payments.