Analysts Predict Extra 20,000 COEs Could Normalize Prices—But Only with ERP 2.0!

SINGAPORE: Analysts are buzzing about the potential impact of an additional 20,000 certificates of entitlement (COEs) to be introduced starting February 2025, suggesting that this move could lead to stabilization in COE prices—a significant change after over two decades of volatility.

This unprecedented COE boost is tied closely to the forthcoming ERP 2.0 system, designed to better regulate traffic congestion in Singapore's densely populated corridors. According to the Land Transport Authority (LTA) of Singapore, these extra COEs will be distributed across all vehicle categories over the next few years, primarily in response to anticipated low COE supply in the coming years.

Associate Professor Walter Theseira, a transport economist from the Singapore University of Social Sciences, explained that introducing these new COEs as early as 2025 makes the most sense given the predicted sharp decline in COE availability. "Injecting these COEs sooner rather than later could help offset future shortages and prevent a steep rise in prices," he stated. Recent years have seen COE prices rocket to record highs, prompting government intervention through a “cut-and-fill” approach to manage price volatility.

Prof. Theseira emphasized that one must consider the cyclical nature of supply and demand. He believes that excessive COE supply introduced during peak demand years could push prices down drastically, which would undermine the market's overall stability.

The new ERP 2.0 system will be vital for implementing such a net increase in COE numbers. This sophisticated technology utilizes Global Navigation Satellite System capabilities to establish real-time tracking of vehicles. With "virtual gantries," LTA aims to deploy improved congestion management strategies that can prevent newly formed traffic snarls following the introduction of additional vehicle quotas.

Professor Raymond Ong from the National University of Singapore echoed Theseira’s sentiments about the new ERP technology, stating that ERP 2.0 enables better vehicular location tracking, allowing for smart congestion management to maintain desirable traffic levels across Singapore's roads.

Despite these advancements, questions remain about why the COE injection does not fall under the existing Vehicle Growth Rate (VGR), which is capped at 0 percent for most vehicle categories. The LTA clarified that this strategy is designed to retain flexibility while addressing specific market needs without committing too firmly to a singular growth trajectory.

This blend of policy and technology innovation may pave the way for future possibilities, including distance-based charging for vehicles, which could further improve congestion management strategies down the line. However, experts caution that the effectiveness of this new system must be demonstrated before such possibilities can materialize.

With Singapore on the brink of these changes, the anticipation is palpable. Will the additional COEs alongside ERP 2.0 mark a new era for vehicle pricing and congestion management in the city? Only time will reveal the long-term effects of this significant policy shift.