Orbital-use fees could more than quadruple the value of the space industry

Abstract

The space industry’s rapid recent growth represents the latest tragedy of the commons. Satellites launched into orbit contribute to—and risk damage from—a growing buildup of space debris and other satellites. Collision risk from this orbital congestion is costly to satellite operators. Technological and managerial solutions—such as active debris removal or end-of-life satellite deorbit guidelines—are currently being explored by regulatory authorities. However, none of these approaches address the underlying incentive problem: satellite operators do not account for costs they impose on each other via collision risk. Here, we show that an internationally harmonized orbital-use fee can correct these incentives and substantially increase the value of the space industry. We construct and analyze a coupled physical–economic model of commercial launches and debris accumulation in low-Earth orbit. Similar to carbon taxes, our model projects an optimal fee that rises at a rate of 14% per year, equal to roughly $235,000 per satellite-year in 2040. The long-run value of the satellite industry would more than quadruple by 2040—increasing from around $600 billion under business as usual to around $3 trillion. In contrast, we project that purely technological solutions are unlikely to fully address the problem of orbital congestion. Indeed, we find debris removal sometimes worsens economic damages from congestion by increasing launch incentives. In other sectors, addressing the tragedy of the commons has often been a game of catch-up with substantial social costs. The infant space industry can avert these costs before they escalate.

Disease-economy trade-offs under alternative pandemic control strategies

“…This coordination failure resembles the classical problem of the tragedy of the commons in natural resources and the environment [43, 44, 45], underscoring the lack of property rights in the market for infection-free common spaces. It also shares similarities with coordination issues that emerge in climate change, fisheries, orbit use and other settings [46, 47, 48, 49]. Correcting this coordination failure via a targeted isolation strategy that internalizes the costs infectious individuals impose on susceptible individuals delivers substantial economic savings (Fig.2 & Fig.3).…”

Open access to orbit and runaway space debris growth

“…We calibrate the economic parameters of our model using data collected by The Space Report (Space Foundation, 2021) on the annual revenues accruing to each sector of the space economy from 2006-2019. These data have been used in other economic analyses of space and orbit use (Wienzierl, 2018;Rao, Burgess, and Kaffine, 2020;Crane et al, 2020;Rao and Letizia, 2021). The data are not ideal for our purpose as they are aggregates covering the entire space sector, but more granular datasets describing specific LEO satellite operators' revenues and costs are not available.…”

“…The former generalization allows us to decompose the marginal external cost of satellites into three channels (congestion, pollution, and debris persistence), while the latter generalization is relevant for analyzing long-run orbit use (Lewis, 2020). Unlike Rao (2018), Grzelka and Wagner (2019), Rao, Burgess, and Kaffine (2020), and Béal, Deschamps, and Moulin (2020), we focus primarily on economic dynamics rather than policy instrument design. However, as is the case with climate management, the positive feedbacks we incorporate are likely important for optimal orbital-use policy design (Lemoine and Traeger, 2016;Daniel, Litterman, and Wagner, 2019;Dietz et al, 2021b,a).…”

“…Finally, the physical detail of our model allows us calibrate parameters to an important region of LEO and estimate the likely time when Kessler Syndrome will occur under continued open-access management. As in Rouillon (2020); Rao, Burgess, andKaffine (2020), andBéal, Deschamps, andMoulin (2020), we use constant payoffs and costs per satellite to derive theoretical results. However, to calibrate the model and estimate the time till Kessler Syndrome occurs we allow both to vary over time and allow the per-period payoff to depend on the satellite stock.…”

Policies for incentivizing orbital debris assessment and remediation

“…One analysis finds that tax at launch, with rates ranging from 0.2 to 2% of production cost, with rebates for good behavior, including maneuvering away from a potential collision and adhering to post-mission disposal regulations, could significantly improve compliance [34]. Another finds that orbital use fees which begin at nearly 1% of average annual profits generated by a satellite and rise over time with rising congestion would remove costly losses caused by present risk and could strongly benefit the long-term value of the satellite industry as a whole [35]. Similar to the rebate method, governments might then tackle non-controllable and defunct debris with tax credits for orbit cleaning, or following the example of deposit-refunds as seen in the management of terrestrial plastic waste.…”