[sustran] Re: distance based fuel tax technology test

[Paul Barter]

Jonathan Richmond wrote: 
> The vehicle quota system is under political pressure. The 
> Singapore government is becoming paranoid about skilled young 
> people leaving Singapore and, in various surveys with college 
> students and the like, has found inability to purchase a car 
> because of cost as a major cause of discontent. My feeling is 
> that change is possible, although there are heavy 
> conservative pressures to keep the quota charges which bring 
> in much revenue -- and the Singapore government always likes 
> revenue! 

Using very simple (simplistic?) reasoning, I think that the proposal in
my paper should allow the same traffic control as the existing system
but with lower revenue. This is because it removes conflicting messages
in the existing system. High fixed vehicle taxes make the usage costs
seem trivial, so ERP charges must be high to have any impact. The
contradictions in the existing system make it more expensive for
motorists than it needs to be. 

Of course, I may be neglecting something which a more sophisticated
economic analysis would reveal. 

> I think there is a legitimate concern, also, that 
> lifting quotas could lead to environmental problems, however 
> skillful the attempts to provide charging mechanisms which 
> will maintain equivalent control. As one person told me, if 
> quotas go, the next political pressure will be to reduce (or not to
> increase) tolls --Jonathan

Agreed.  However, don't forget that an important feature of the
Singapore demand management system is the extent to which the mechanisms
for the pricing have 'automatic triggers' (or are 'quantity based' in
the economic jargon). For example, the COE prices under the vehicle
quota rise and fall with demand and the ERP price changes are triggered
by traffic speeds going beyond a certain target range. This helps
depoliticise them to some extent... Although not completely of course!
This allows the political debate about pricing to be shifted to being
not about prices themselves (very difficult to defend) to being about
the size of the quota, the amount of road building, the speed targets,
and such like, which are much easier to defend.

Paul