Car restraint policies and mileage in Singapore

Abstract

Negative externalities often surface after policies are implemented. This paper analyses how two “hard” Travel Demand Management (TDM) policies implemented in Singapore to target vehicle ownership and road usage may contribute to a negative externality namely excessive mileage accumulation. This has implications on resource depletion such as petrol wastage, higher CO2 emission and losses in time and productivity. Vehicle ownership in Singapore is managed firstly via the requirement to bid for a Certificate of Entitlement (COE) which entitles the usage of local roads and secondly via the payment of an Additional Registration Fee (ARF) which is refundable between 75% and 50% to incentivise the de-registration of a vehicle before it is 10years old. Such deregistered vehicles may also be eligible for a COE refund between 0% and 80% depending on age. The COE and ARF costs are significant as they typically account for more than half the purchase price of a vehicle. Furthermore, road usage is subject to Electronic Road Pricing (ERP) fees on busy segments. A sample of over 8700 used cars is analysed to infer the effects of the non-refundable (or “sunk”) and the “variable” portions of the combined cost of COE and ARF as well as the number of ERP gantries on mileage over and above traditional factors such as petrol price and engine size. The findings suggest tweaks to the TDM policies to reduce mileage and its negative implications.