Electronic Road Pricing – A Real Solution to Ease Traffic Jam?

In 1998, the Land Transport Authority of Singapore introduced the Electronic Road Pricing (ERP) which is effectively an electronic toll collection. The rational of implementing the ERP is to manage congestion so that it reduces the cost of business (due to time saved).

Opposition parties had claimed that the government has used the ERP system as a revenue generating tool rather than to serve its primary purpose to control traffic congestion. Are there any truths in the claim?

The government claimed that when there is no congestion, there will be no ERP. ERP rate is measured by the amount of traffic that passes the gantry any given time. However, despite implementing the ERP, the amount of toll had steadily increased over the years. It would signal that the amount of traffic had in fact, steadily increased despite the ERP. So why did the ERP fail to accomplish its goal? I plotted the rate of infrastructure improvement (using lane-kilometres as a gauge) and the vehicle population (cars population measure in 100s).

Infrastructure and Car Population
Exhibit 1: The growth of Infrastructure and car population. Note: No statistics are available before 2002 for car population.

We can see very clearly that our infrastructure increases very gradually in a straight line. However, the car population increases in a very steep curve in the recent years. If Singapore maintains a policy of steady growth rate for car population, the growth would be exponential. It suffices to say that our infrastructure is not keeping up with the growth of car population. Hence, the argument that the ERP would be lowered and waived is not meaningful at all as we can see that it would never happen if prevailing policies are unchanged.

The government insists that the business cost of traffic congestions is bad for the economy. However, with the ever increasing ERP pricing, the amount of traffic has not reduced and the time lost for travelling is still significant. The reason behind the lack of control is simply due to the inevitable use of the roads. Nobody would go to Shenton Way to have breakfast during the peak hours because they feel like it. For the thousands who are working in central business district(CBD), they do not have any choices. They need to be there for work and no matter how much the ERP has increased, they would still have to bite the bullet. Hence, the ERP is not only ineffective to manage congestion, it burdens Singaporeans by reducing the total disposable income.

Next, the ERP hours had been extended till 8pm at nights in city area and 1030pm for traffic exiting business districts. Moreover, Saturdays ERPs had been introduced several years ago. Singaporeans cheekily called it “shopping tax’ or ‘food and entertainment tax’. However, the tolls obviously contradict the objectives of ERP to manage traffic congestions to reduce the cost of business. This is the primary reason why Singaporeans feel that the ERP system has been abused to generate revenue for the government. Moreover, the ERP during those hours caused many drivers to go back home late or make excessive detours. I would argue that the cost to the economy is greater as there are more pollution and energy loss associated to the longer roads planned by the drivers to avoid ERP. The ERP reduced the disposable income and reduced the amount that Singaporean spent on the economy reducing the multiplier effect of money. And finally, by encouraging the people to go back later, the government increases the level of fatigue and lowers the quality of life for Singaporeans.

I suggest that we re-look at the ERP policy and effectively use it to control traffic congestions as it how it was originally planned.

  1. Increase the toll rate for the most direct roads to CBD area but decrease or waive the ERP for minor roads leading into CBD. This would make certain roads premium roads for people who needs to urgently go to CBD to conduct business and hence reduce the cost of business due to traffic congestions. However, by reducing or waiving the tolls on other less popular roads, it would encourage other users to detour. Presently, the ERP rate is uniform across all the roads leading in the CBD and hence there is no incentive for users to divert and use other roads.
  2. Waive the ERP at night at some areas of CBD. This would encourage people to dine in the CBD area and hence decrease the congestions to other popular spots such as Orchard Road. This effectively spread out the masses as they would be given more choices.
  3. Waive ERP on outbound roads at night. This would encourage Singaporeans to go home earlier and spend quality time with their family. The ERP had shown that it is ineffective to control traffic congestion during after work hours and it should not be used as an excuse to raise revenue for the government.
  4. Waive ERP for public transport. This would reduce the operating cost of public transport and hence pass the savings to the commuters.
  1. Wow! Extremely good arguments. Very impressive. 🙂

  2. Very detailed analysis, awesome job 🙂 But may I know where did you get your statistics for the graph?

  3. thank you!!!! this will help my econs essay on negative externalities 🙂

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