Power & Politics Hub

This is the fifth article on Draghi’s report on European competitiveness by this blog and the final one which will focus on a specific industry. There will be two more articles after this one, focusing on specific horizontal policies.

The article is going to focus on an industry which is certain to become even more important over the coming years- space. 

It is no secret that the global space sector, as the report mentions (pg 172) is at the forefront of technological innovation, contributing to cutting edge developments, as well as to the safety and security of modern societies. The space sector can be useful in transport, in predicting natural disasters, as well as in predicting patterns in energy production. In the security and defence sphere, many activities are dependent on satellites and their instruments to identify threats on the ground and in the air, verify situations on the ground and secure communication in zones of ongoing hostility. 

At the same time, the space industry is undergoing significant structural changes with the increased participation of private companies and rapid growth among innovative start-ups. The space industry is moving towards new funding schemes (private financing), risk-openness, the fast delivery of products and services, and lower costs. The International Space Station (ISS) is expected to be decommissioned in 2031, which would lead to an acceleration in the development of new commercial and national capabilities. In the future, large space projects would likely be based on multi-country partnerships, as well as private-public partnerships. 

The EU has, so far, developed world-class strategic space assets and capabilities, with technical competences on par with other space powers in most areas. Particularly regarding the assembly and integration of systems, the EU is considered a space power with significant industrial capacity and know-how. More than 250,000 highly skilled jobs are directly supported by the EU Space Programme with estimated value-added between EUR 46 and 54 billion. The EU space sector masters cutting-edge space technologies, fostering innovation in areas including materials and satellite communication. EU companies are also global leaders in satellite production. 

Compared to the EU’s main competitors, public funding over the past decades has been significantly lower. Nonetheless, this has not prevented the EU from being amongst the leaders. The EU is second in the world in terms of attracting New Space venture investments, however it is far behind the first placed United States, especially over the last three years. Nevertheless, the EU has arguably lost ground in space activities and lagging further behind may quickly translate into deeper strategic dependence. Europe represents about 12% (EUR 5.6 billion) of the global upstream market value and 23% (EUR 83 billion) of the downstream market. The EU has specifically lost ground in commercial launchers and geostationary satellites. As a result, it has had to rely temporarily on US Space X launchers. 

Another problem is that the  lack of coordination among EU Member States’ investment in space hinders the aggregation of demand and ‘anchor spending’. The notion of institutional space missions serving as an anchor for customers of domestic critical technologies is a strategy extensively employed by the USA and China. 

The EU lacks a unified legal framework for its space sector. At the moment, there is no single Space Law in the EU, but multiple and heterogeneous national space laws, which evolve at different speeds and prevent the EU from exploiting the benefits of a Single Market for commercial players. 

In order to address the aforementioned problems, Draghi offers several objectives, which include guaranteeing European sovereignty in autonomous access to space, defence capabilities and key applications to society, maintaining or achieving world-class industrial leadership in selected areas and emerging space-based industrial segments and enabling innovation and scaling up of successful European market participants.

Draghi proposes that the European Space Agency’s (ESA) geographical return principle is removed in order to reduce the fragmentation of the EU’s industrial base and modernise EU procurement rules. As an example, there should be concentration on projects that demonstrate the potential of significant scientific and technological advancement, regardless of the geographical location of the participating entities. Also, relevant EU procurement rules should be modernised to make them fit for the characteristics of the current space market, allowing for faster and more flexible procedures.

A functioning Single Market for space must be established, through a common EU legislative framework. Common standards should be introduced, as well as harmonising licensing requirements in Member States, so that products and solutions comply with the same requirements. 

A multi-purpose EU Space Fund must be established which would enable the Commission to jointly purchase space services and products on the EU market.  Such joint and centralised procurement and purchasing would help Europe’s industrial base to increase its capacities. 

Lastly, joint strategic priorities for space research and innovation should be defined, and be supported by increased coordination, funding and pooling of resources on national and EU levels. The definition of joint strategic R&I priorities at the EU level, as well as resource aggregation, should aim to limit small national research projects and promote EU-wide projects which can achieve scale.