Electronic Road Pricing (ERP) is an electronic system of road pricing based on a pay-as-you-use principle. It is designed to be a fair system as motorists are charged when they use the road during peak hours. The ERP system uses a dedicated short-range radio communication system to deduct ERP charges from CashCards, which are inserted in the In-vehicle Units (IUs) of vehicles before each journey. Each time vehicles pass through a gantry when the system is in operation, the ERP charges will be automatically deducted.
The governmental agency that oversees ERP is the Land Transport Authority (LTA). LTA reviews the traffic conditions on the expressways and roads, where the ERP system is in operation, on a quarterly basis and during the school holidays. To discourage motorists from speeding up or slowing down to avoid paying higher ERP charges, the LTA decided to make ERP changes more gradual.
The implementation of the ERP system affects all motorists who pass under the gantry, when they use the particular road. This includes car owners, bus drivers, taxi drivers, motorcyclists, etc. For car owners and motorcyclists, they will incur a private cost, as they have to pay a sum of money for using the road. This is different in the case of taxi drivers. Their passengers are the third parties that are not directly involved in the consumption of the good, i.e. using the road. This is evident in that passengers will have to pay the ERP charges in addition to their taxi fares. As for bus drivers, the bus companies in Singapore, namely SBS and SMRT currently absorb the ERP charges. However, this may change if LTA decides to increase ERP charges so as to effectively curb the problem of traffic congestion. When this happens, bus companies may have no choice but to pass on the cost to consumers so as to prevent them from incurring a loss as a result. Thus, consumers are once again the third parties indirectly involved in consuming the good.
The supporters of the Electronic Road Pricing Policy feel that road pricing is a good instrument to use to internalize most of the external effects which includes accident externalities that arise when extra vehicles on the road increase the probability that the other road users will be involved in an accident. With ERP, we can make sure that road users do not use specific roads during peak hours unnecessarily which can in turn minimize the effect of traffic jams and reduce the number of road accidents. Hence the ERP is an effective policy since it ensures that all road users are being evenly distributed on all the roads in Singapore. With the minimization of traffic jams and reduction in the number of road accidents in Singapore, we can help to save more of road users’ time.
The critics of the Electronic Road Pricing Policy feel that in terms of negative environmental externalities, road pricing is probably not the optimal instrument for internalization. Taxes on fuel or emission fees, for instance, charge vehicle emissions in a more direct way and they are very simple to design. The negative environment externality includes pollution of the environment due to the emission of greenhouse gases which may affect one’s health. Hence ERP is indeed not a very suitable way in curbing this problem since the revenue the government gets from ERP would not help to solve the problems of global warming. So it will be indeed more appropriate if government place a tax on fuel and not on the usage of roads.
Roads are produced by the government because it is a public good which is non-excludable and non-rivalry, having positive externalities to the society. Therefore, the private sector is not able to produce and market roads profitably. Directly and indirectly, consumers and producers benefit from them. It offers convenience to the former and supports the activities of the latter. It has to be government to implement ERP because only government has the authority to collect these “taxes” in order to pay for the external costs.
The overconsumption of roads (demerit goods) leads to traffic congestion (market failure) which is caused by negative externality arising from private car driving. Therefore, government needs to implement ERP which is equivalent to the marginal external costs drivers generate so as to ensure that the roads will function at the optimal efficient level; other consumers and producers will then be able to travel smoothly without time wastage. To achieve an optimal allocation of resources devoted to road use, the MSB of road use has to be equal to the MSC of road use. Furthermore, as road use is income inelastic, as incomes rise, people use their cars more and more families would have cars. This increased in economic activity and geographical mobility meant that there are likely to be more cars on the road which does not solve the problem of traffic jam. Hence, government needs to implement ERP so that those who want to use “popular roads” have to pay an additional charge. This implementation of ERP would reduce the amount of traffic on the roads especially during peak hours resulting in efficient use of the roads, benefitting both consumers and producers.
Credits: Joy Ong, Png Hui En, Aloysius Ng and Yeo Mei Shi
Subscribe to:
Post Comments (Atom)
7 comments:
great article, just that i was wondering if the good that you are talking about here is the use of ERP-, because the essay you guys wrote focused on other stuff like the negative externalities of the car and road usage. nice essay anyways(:
So can we also say that since roads are a public good there can be a possiblity that market failure can be caused by a free-rider problem? And that the use of ERP ensures that people who use the roads actually pay for the maintainance thus making the roads excludable.
[quote]So it will be indeed more appropriate if government place a tax on fuel and not on the usage of roads.[/quote]
Hold on a minute.
By taxing fuel, you are effectively taxing every single metre that the vehicle covers.
With the ERP, the only tax imposed is on the distance driven within the restricted zone.
So this is unfair to those who do not drive into that zone so frequently.
yoz..nice relevant stuff, cool application there haha.. hmm..but jus one thing to think about..if u implement these gantrys at potential places that will be jammed, that will ease the problem no doubt. But now wun there be jams in roads where the road pricing system is absent? And we see a decrease but nonetheless jammed roads still in s'pore. Probably people are willing to pay for the usage of the road. hmm..inelastic demnd? so what else can be done? Encourage public transport usage or smth i guess..oh yeah and i dun understand why "overconsumption of roads" is a demerit good. isn't using roads an act? and traffic congestion is market failure?"
okay. i dont agree with the third party of the people in taxis and buses when you guys say "This is different in the case of taxi drivers. Their passengers are the third parties that are not directly involved in the consumption of the good, i.e. using the road. This is evident in that passengers will have to pay the ERP charges in addition to their taxi fares."
in my opinion, you pay the taxi driver to drive. it's like if you did not board the taxi, the driver wouldnt drive through the ERP either. therefore, you are the one "using" the road. and you should pay, not the taxi driver. am i not right?
in the case of the buses, the passengers should not pay as they are helping to relieve the congestion. arent they? by taking buses, there would be less cars on the roads which means less congestion. if everyone were to choose the alternative of taking a bus, i would think that the ERP policy might not have been implemented. this is so as the roads would not be as congested anymore. so there is no need to have the ERP.
Yeah i agree with hao li about the third party thing. I think in this case, the ERP is a positive externality (though motorists wouldnt agree to that entirely). So in general, the third party would be those using the affected roads cos fewer vehicles means less congestion and lower probablity of accidents occuring.
Ying
I don't think I like ERP, personnally.. Well, I dont't think that because of ERP, people will not pass that road. For those who can afford cars, $4 a day for ERP, is nothing. If they don't want to pass a particular road, it must be because of traffic jam, not the ERP. It is because the benefit of driving cars and pass that particular road is higher than the cost of ERP. Thus, i think it is ineffective. That is why ERP roads are still full because many people may think the same too!
Post a Comment