From Gantries to Satellites: The ERP 2.0 System

Lan Sin Yu and Finna Ng
2 days ago
8 min read

In this Explainer, find out…

Why is congestion an issue for Singapore, and how has its ERP system changed?
How does the current ERP system work, and what problem is it designed to solve?
What are the merits and drawbacks of the new ERP system?

Introduction

As a land-scarce city-state, Singapore’s road space is both limited and highly contested. Managing traffic congestion is therefore a key policy challenge. The Government has been making use of road pricing as a policy tool, most notably through the Electronic Road Pricing (ERP) system. By charging drivers that pass through ERP gantries when roads are busy, this scheme seeks to regulate and manage traffic flow.

This Policy Explainer will provide an overview of the ERP system, tracing its evolution from its early form of road pricing to the upcoming ERP 2.0 system.

Traffic Congestion in Singapore

Studies have shown that traffic congestion brings about negative effects on the economy, environment and general health. From an economic perspective, Singapore is a major trading hub, meaning that it very much relies on efficient transport systems. Congestion could therefore bring economic harm to Singapore, by causing delays and bringing down productivity levels.

From an environmental standpoint, congestion leads to more “stop-start” traffic, which increases fuel consumption and emissions. This contributes to poorer air quality and increases the overall environmental burden in a dense urban setting.

In terms of public health, the higher levels of air pollution resulting from congestion can lead to respiratory issues and various other health concerns. Given Singapore’s dense urban environment, where residential and commercial areas are often located close to major roads, individuals are more directly exposed to vehicular pollutants. In addition, longer and more unpredictable commuting times may increase stress levels and reduce overall well-being.

As such, Singapore has sought to design various policies over time to respond to the challenges of road congestion. Let us now consider how these policies have evolved over the years.

1975–1998: Area Licensing Scheme

As Singapore’s economy developed and household wealth grew in the late 1970s, more and more residents bought and owned cars. Soon, traffic congestion became a severe problem during rush hours in the Central Business District (CBD). To deal with this issue, Singapore introduced two congestion pricing measures. First, the Area Licensing Scheme (ALS) was rolled out in 1975. Second, the Certificate of Entitlement (COE) system followed in 1990 (see the linked Policy Explainer for more on the COE system).

Under the ALS, drivers entering the CBD would first have to pay a toll charge by purchasing a paper licence that had to be displayed on their vehicle. The scheme operated during restricted hours, typically peak periods in the morning. Enforcement was carried out manually by officers stationed at entry points who checked whether vehicles had valid licenses. Certain vehicles, such as buses and emergency vehicles, were exempted from the scheme. Drivers who did not display licences would be fined. The ALS was considered a success as it managed to bring down peak-hour traffic substantially. In fact, traffic volume in the CBD fell by about 44 per cent in the first year of the ALS’ implementation. As the first city in the world to implement the ALS, Singapore set an example for other countries that would soon follow suit.

1998–2026: Electronic Road Pricing

However, by 1998, Singapore replaced the ALS with the automated ERP system, which was better able to manage changes in traffic flows. ERP gantries (which are still in use as of May 2026) automate road pricing by deducting tolls from smart cards slotted in in-vehicle units. This makes toll collection more efficient as vehicles need not stop or slow down. ERP rates are set to vary by gantry location, time period, and traffic conditions, allowing for a more dynamic response to congestion than the fixed pricing of the ALS. This flexibility enables the Government to regulate road usage more precisely during peak congestion periods, improving overall traffic efficiency.

2027 Onwards: ERP 2.0

From 1 January 2027, Singapore will fully implement its new satellite-based ERP 2.0 system. The transition was driven by limitations of the existing gantry-based system. Currently, charges are tied to fixed locations. Pricing is only applied when vehicles pass specific gantries, so congested areas that lack comprehensive ERP coverage may not be effectively priced. With the popularisation of real-time navigation technologies like Google Maps, drivers tend to continuously adapt their routes in response to changing traffic conditions. As traffic patterns grow more dynamic, fixed road pricing infrastructure under the old ERP system becomes less effective at managing congestion today.

Furthermore, the current ERP system is reaching the end of its operational lifespan. The technology includes ageing gantries and in-vehicle units, which are difficult and costly to maintain. Replacement parts may require customised production or less reliable substitutes. These factors undermine the long-term sustainability and reliability of the system.

The ERP 2.0 system was therefore introduced as a technological upgrade to ensure that congestion pricing remains effective and relevant, while also supporting future transport policy developments.

The ERP 2.0 System

From 1 January 2027, the Land Transport Authority (LTA) will transition fully to the ERP 2.0 system for road use charging. By then, all Singapore-registered motor vehicles must have the new On-Board Unit (OBU) installed to travel on public roads. As of 31 January 2026, approximately 930,000 vehicles (representing more than 93 per cent of all vehicles in Singapore) have been fitted with an OBU.

The OBU enables real-time positioning and communication with satellite systems, eliminating the need for physical gantries. It compares the driver’s location with virtual ERP zones to compute charges and automatically deduct them. With it, charges are no longer confined to specific gantry points, but can be spread across multiple locations, allowing for more precise targeting of congestion. This enhances the responsiveness of road pricing by allowing adjustments that are more closely aligned with real-time traffic demand. The OBU also alerts drivers when they approach ERP charging locations, displays real-time traffic incident alerts, and provides estimated travel times along expressways. These features allow drivers to make more informed decisions on their routes.

Merits and Drawbacks of ERP 2.0

Merits of ERP 2.0

More Flexible Traffic Control

The OBU allows for more flexible traffic control in two key ways. First, since each vehicle’s position can be accurately tracked with the OBU, the authorities can aggregate this information to map the real-time congestion in Singapore. This allows LTA to adjust ERP fees on the go, diverting traffic flow and easing congestion along roads. Second, the OBU gives drivers access to accurate, real-time information, enabling them to better plan their routes. In this way, drivers can anticipate congestion ahead of time and opt for alternative routes. This can reduce both individual travel time and overall traffic load on roads.

Lower Implementation Costs

Additionally, the ERP 2.0 system significantly lowers the cost of implementing road pricing policy. Under the current system, introducing a new ERP charging point requires the construction of a physical gantry. This is a large, expensive piece of infrastructure that takes time and resources to plan, build and maintain. With ERP 2.0’s satellite-based system, new charging points can instead be activated virtually, without any major infrastructure on the road. This affords LTA far greater flexibility to expand or adjust the road pricing network in response to shifting traffic patterns, at a fraction of the cost. In effect, the barrier to introducing new congestion charges is dramatically lowered — a main advantage of the revamped system.

Figure 4: Possible Road Markings for ERP 2.0

Future Policy Developments

Furthermore, the new system creates opportunities for future developments in road policy. The Government can leverage the novel satellite-based technology to charge drivers based on their distance travelled, factoring in the location and time of such travel. Transport analysts say that this form of road pricing would be “more equitable”, since it takes into account the amount of congestion resulting from a driver’s time on the road. However, the Government has clarified that it has no immediate plans to implement distance-based charging, preferring to stay “prudent” before making such a major policy decision.

Drawbacks of ERP 2.0

Technical Issues

Though the ERP 2.0 system may in theory bring about more precise road pricing, it is not a policy without bumps. Since installation began in November 2023, around 5,400 cars have encountered problems with their OBUs, representing about 1.8 per cent of approximately 300,000 cars fitted as at June 2025. These issues ranged from units freezing to screens getting stuck in booting mode. Exacerbating the issue, troubleshooting visits by technicians typically took between two to four hours, further costing affected drivers. For a system that is mandatory for all vehicle owners, these reliability issues highlight potential challenges in large-scale implementation.

Equity Concerns

The new road toll system may also disproportionately affect vulnerable groups such as delivery riders, taxi drivers and private-hire drivers, who travel long distances due to the nature of their work. Many of these workers fall within lower-wage brackets, making them more sensitive to cost increases. If distance-based road charging is implemented in the future, road tolls may rise, increasing operating costs for such workers and squeezing their already-tight margins.

From an equity perspective, this raises concerns that the ERP 2.0 system could have regressive effects. Distance-based road tolls (if rolled out) could place a heavier financial burden on drivers with a lower capacity to absorb such costs.

Data Privacy and Security

Another worry is that the use of the OBU may compromise the privacy of drivers. In Parliament, Member of Parliament Dennis Tan spoke about how transaction and location data from the OBU can be used as evidence in court. Whereas in-vehicle units under the old ERP system stored trip data locally in smart cards, the new OBUs enable continuous data collection under a central server. To its skeptics, the ERP 2.0 system may be unfairly violating privacy rights if government agencies can access OBU data for purposes unrelated to road pricing.

In response, the Government assured that LTA would only use anonymised or aggregated data to manage traffic and plan transport policies. Vehicle-specific data, on the other hand, would only be used by LTA to facilitate payment and enforce penalties (e.g., for not paying ERP charges). Moreover, Senior Minister of State for Transport Dr Amy Khor stressed that the OBU was designed with security in mind. Data stored in the OBU is encrypted and cannot be directly accessed by drivers or external devices.

Nonetheless, the fact remains that all drivers’ real-time location data will be collected and transmitted to the authorities. While the use of navigation apps like Waze is voluntary, drivers have no comparable choice when it comes to installing the OBU. To policymakers, this may ultimately be a necessary and worthwhile trade-off for an efficient and nimble road pricing system.

Conclusion

The ERP 2.0 system is but the latest upgrade to Singapore’s long-evolving congestion management system. Its harnessing of satellite-based technology will enable both responsive road pricing and substantial cost savings. At the same time, however, there remain teething problems in the policy’s implementation, as well as concerns over equity and data privacy. Only time will tell if ERP 2.0 lives up to its predecessor.

This Policy Explainer was written by members of MAJU. MAJU is a ground-up, fully youth-led organisation dedicated to empowering Singaporean youths in policy discourse and co-creation.

By promoting constructive dialogue and serving as a bridge between youths and the Government, we hope to drive the keMAJUan (progress!) of Singapore.