The growth of space business—like satellite services—presents challenges ranging from ensuring the safety of unmanned satellites to minimizing air and light pollution. These challenges present an opportunity for entrepreneurs to develop innovative ways to solve these problems in a way that enhances their products’ value to consumers. Unfortunately, they also provide an opportunity for bureaucrats and politicians to grab headlines by imposing new regulations on the space industry.
Therefore, it is not surprising that the Europeans Union’s regulation-happy bureaucrats have released a “space act” that is full of costly one-size-fits-all regulations and mandates dealing with everything from space debris, to collision avoidance, to light and noise pollution. Some might think this law will give American companies a competitive advantage over European space companies. However, the space act applies to any company that wishes to provide services to EU residents. The EU is an important market for satellite communications, Earth observations, launch services, and hardware exports. American space companies also rely on EU companies for parts, and some U.S. companies have partnerships with them as well. The practical reality is that abandoning the EU market is not an option for most American space programs, with the exception being smaller and newer space companies who simply cannot afford to comply with the space act’s regulations.
The EU space act will hurt the U.S. space industry, as well as all those who use space technology, by making the market less competitive, reducing innovation, and raising prices. Proponents of the space act say it will “harmonize” regulations among the 26 EU countries, making compliance easier. However, the space act creates new mandates and regulations in areas like environmental impacts, cyber security, and operational standards. Furthermore, a non-EU company will have to receive authorization from a “competent authority”— as well as coordinate with the European Commission and the EU Agency for the Space Program— in order to operate in the EU. Space companies will also have to comply with both EU and individual European counties' regulations during the transition period.
The European Commission’s impact assessment of the space act’s licensing fees estimates that they could cost as much as 100,000 euros (approximately $115,809)—while a launch provider could have to pay as much as 1 million euros ($1,585,285.51). This “space tax” could cost a U.S. company who is planning to launch a fleet (or constellation) of 20 satellites as much as 2 million euros ($2,316,200). American space companies will also pay for conducting technical studies, environmental analyses, and other expenses necessary to ensure compliance with the EU’s rules and regulations. The EU Commission estimates that the space act could increase the costs of manufacturing and operating a satellite company by as much as 10%. On top of that, costs could rise by an additional 10% due to the new cyber risk management and reporting duties imposed by the space act. Space companies must also contract with specialists in cyber security, risk management, and other areas. Of course, this estimate of compliance costs cannot include the costs of lost innovations that could have been developed if companies were not forced to divert resources away from productive activities and towards complying with government mandates.
European governments will likely provide European space companies with government subsidies to offset the space act’s compliance costs. This will lead to American space companies deploying an army of lobbyists to DC to obtain similar aid for American companies. These subsides will likely go to bigger, established firms—giving them an even greater edge over smaller competitors. The EU space act could also provide a pretext for the imposition of new “retaliatory” tariffs on imports from EU countries. The European Union’s proposed space law is an overly prescriptive and costly regulatory system that will make the space industry less competitive, less innovative, and more expensive.
Ironically, the fact that compliance costs are so high could create a de facto global standard for (over) regulation of the space industry. The U.S. government should use its influence with Europe to change the space law, limiting the government’s role to punishing space companies for harm done to persons or property— and allow private companies to come up with their own solutions to the challenges facing the industry.
