The increase in the number of electric vehicles on North Carolina roads, along with increased fuel efficiency of vehicles in general, has state officials looking for new ways to fund future transportation projects as gas tax revenue struggled to keep up with rising costs and demands.

NC explores new road funding sources as gas tax revenue dries up

As drivers waited in the long vehicle line for the free ferry between Hatteras and Ocracoke islands, several gathered together and muttered about the price of gasoline.

Although having fallen back a bit in recent weeks, the price was still pushing $4.50 a gallon at many of the stations that dot the Outer Banks. As a vacation hot spot and a place that’s notoriously hard to get to for both visitors and suppliers, seeing higher prices than those found on the North Carolina mainland isn’t a surprise.

But Bobby Johnson, wrapping up his week-long holiday at one of Cape Hatteras National Seashore’s campgrounds, wasn’t complaining.

NC’s dirty secret: Vehicles account for more greenhouse gas emissions than power plants

“I don’t really pay much attention to gas prices anymore,” said the Piedmont resident as he leaned against his Tesla electric vehicle under the blazing mid-July sun. “It’s not a concern of mine these days.”

For state officials, though, that’s a problem. Not the price of gas, per se, but that the tax revenue from selling gas isn’t going as far as it used to in North Carolina because more people — like Johnson — are either driving electric vehicles that don’t use gas or getting behind the wheel of newer vehicles that get a whole lot more miles to the gallon that older gas guzzlers. According to the U.S. Department of Transportation, the average fuel economy of the U.S. 2021 vehicle fleet was 36 miles per gallon (mpg), with new standards increasing that 33 percent by 2026. It was 24 mpg in 2000.

While that’s great for the environment and the battle against climate change, since greenhouse gas emissions from vehicle tailpipes are now the state’s top pollution source, it isn’t such a rosy picture for the bottom line of the N.C. Department of Transportation (DOT).

Gas prices are dropping in large part to lower worldwide crude oil prices, according to AAA.

The state gas tax of 38.5 cents per gallon generates nearly $1.8 billion a year for the DOT and is the department’s largest revenue generator. The federal gas tax of 18.5 cents, along with a slightly higher tax on diesel, is the primary source of the more than $1 billion a year in federal funding North Carolina receives from the federal government.

But the gas tax hasn’t kept up with inflation or rising costs at the pump, and politicians are loathe to raise taxes in general and gas taxes in particular since gas prices are so visible and the tax impacts almost everyone on a daily basis. Congress, for example, hasn’t raised the federal gas tax since 1993, and the nonprofit Tax Foundation states that in real terms the tax has lost half of its value since then because it isn’t indexed for inflation.

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