Funding the future of mobility

Deloitte Insights

Funding the future of mobility

Most governments rely heavily on revenue generated directly and indirectly by transportation. Everything from fuel taxes to parking fees, traffic violation fines, value-added taxes from vehicle purchases, subway and bus fares, and registration and licensing charges can provide critical revenue to maintain infrastructure, support public transit, and more.

Yet as the future of mobility unfolds, those reliable sources of funding could come under increasing strain. The rising electrification of vehicles could reduce tax receipts from diesel and gasoline. Shared mobility services may prompt people to abandon car ownership altogether, which would lead to declining revenue from sales taxes and licensing and registration fees. And if autonomous vehicles take off, traffic violations and demand for parking could plummet. For an indication of the possible revenue shortfall, figure provides a snapshot of current vehicle-derived revenue in the United States and rough estimates of how it could shift by 2040.

At the same time, the need of governments globally for transportation funding has rarely been greater. Fueled by population growth and urbanization, the cumulative global shortfall in funding for road infrastructure could balloon to more than US$7.5 trillion by 2040, according to the G20-sponsored Global Investment Hub. And capitalizing on emerging trends in mobility is likely to require new spending. For example, the experiences of London, Stockholm, and Singapore suggest the gantries, cameras, and vehicle sensors needed to enable congestion charging can cost several hundred million dollars to install. In the future, establishing even more dynamic usage-based road pricing and setting up a citywide “digital backbone”—an integrated mobility platform—that can help manage supply and demand and increase throughput could require even greater upfront investment (although the potential long-term revenue generated could also be greater).

Four ways to potentially address mobility costs

So what can be done? Some governments have explored a number of ways to help shift transportation-derived revenue away from traditional sources like fuel taxes. Four broad approaches have either proved successful, attracted interest from some governments, or may emerge in line with new technology—usage-based charging, licenses and fees, monetizing mobility data, and public-private partnerships (PPPs) (figure 2). All four have advantages, limitations, and potential challenges, and we’re not suggesting there’s a silver bullet for funding tomorrow’s mobility needs. But understanding the tradeoffs associated with these different funding and financing mechanisms allows public and private sector leaders to be clear-eyed about their options as they seek to enable a mobility landscape that is faster, cleaner, safer, and more equitable.

  1. Usage-based charging
  2. Licenses and fees
  3. Monetizing mobility data
  4. PPPs
Read the full article on Deloitte Insights

Justine Bornstein, Simon Dixon, Michael Flynn, Derek M. Pankratz

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