Europe is losing the space race, more rules won't help

As space rapidly becomes an essential battlefield, Europe risks being left behind. Its current approach to the new space race — regulate first, compete later — is unlikely to help.

Ukraine’s dependence on SpaceX’s Starlink for military communications has exposed a strategic vulnerability that the European Union is now struggling to address. In its war with Russia, Ukraine has coordinated strikes and battlefield logistics through a single American company’s 8,000-plus satellite constellation — a scale and capability Europe can’t currently match, according to the Tribune News Service.

Although the EU has recognised this gap, its proposed response risks repeating mistakes it made with other cutting-edge technologies, leading to burdensome rules, high costs and few productive companies.

Exhibit A is the EU’s proposed Space Act, which is explicitly framed as a bid to “shape norms and standards globally” for space safety, sustainability and so on. Its goal of harmonizing more than a dozen member-state space policies makes sense. It also identifies real concerns, including orbital congestion, space debris and cybersecurity. Yet the law’s broader framework risks extending the “Brussels effect” into a capital-intensive, innovation-driven sector where Europe is already woefully behind.

As things stand, Europe accounts for only about 10% of public investment in space and 22% of private investment, versus well over half from the US. Its market share in manufacturing and launch has fallen to about 6%, from more than 20% in 2008, reflecting SpaceX’s rise. Profitability and productivity have declined across the sector.

Launch economics illustrate the scale of the challenge. Europe’s Ariane 6, a heavily subsidised expendable rocket, has completed only a handful of launches since last year and is estimated to cost more than $100 million per flight. Space X’s reusable Falcon 9 has flown more than 160 times in the past year alone and now costs perhaps $70 million per launch. Unless Europe can better control costs, it will struggle to get a competitive constellation into orbit.

Both industry bodies and government officials have warned that the Space Act will only hinder that objective. It creates costly obligations and places a particular burden on smaller companies. Some of its requirements aren’t even feasible with existing technology. Many technical standards have yet to be defined, leaving firms unable to plan ahead. The European Commission estimates the act could add up to 10% to satellite company costs; other studies suggest the impact on profits, investment and R&D will be higher.

Some aspects of the law amount to simple protectionism. Registration requirements and legal-representation mandates discriminate against non-EU operators, while obligations triggered by “mega” and “giga” constellations will in practice apply only to US systems. Similarly, the same space agency that will operate Europe’s satellite constellation also assesses compliance for foreign competitors, undermining its credibility. Such distortions not only raise costs and impede competition, but they also could jeopardise US collaboration in crucial areas such as remote sensing and debris mitigation.

There’s still time for a better approach. To start, the EU should amend the draft regulation to avoid duplication with national authorities and ease the burden on smaller companies. It should also grant regulatory equivalence to companies that meet international safety and sustainability benchmarks, rather than impose unilateral EU requirements.

Next, Europe needs to prioritize capabilities over compliance. Space is now central to defense, where Europe still underspends. Germany’s planned $41 billion investment in space-based defense points in the right direction. Extending the mandate of the European Space Agency to develop dual-use, military-grade systems also makes sense. But funding remains inadequate. More joint procurement and clearer rules for dual-use systems would help close the gap. IRIS2, Europe’s flagship constellation due by 2030, will hinge on credible delivery, not regulatory protection.

Europe hasn’t regulated its way to competitiveness on Earth, and it is unlikely to do so in orbit. Its leaders should rethink this misguided effort while there’s still time.