Reaping the rewards of the new space race

Many economic sectors depend on space technologies and services, including agriculture, finance, transportation, and insurance. The most accurate weather forecasts and more than half of all climate variables (long-term changes in weather patterns) can be measured only from space.³ An advanced military requires satellite-based communications, navigation, and intelligence. Overall, a prosperous US space industry offers countless benefits, and the industry is poised to provide more.

A growing commercial sector can offer even more benefits

Commercial innovation in space is improving knowledge and daily lives.

Space companies are connecting the world with globally accessible broadband internet provided by satellites. Pharmaceuticals, semiconductors, and even human-grade knee cartilage have been manufactured aboard the International Space Station by US companies partnering with NASA.⁴

Many technologies pioneered by NASA helped to spur the commercialization of the space industry. As evidenced by research conducted aboard the International Space Station, space is an important source of continued innovation and scientific development (figure 3).

The US commercial sector is reciprocating by providing government more affordable and innovative space services, such as crewed spacecraft and support for national security missions.⁵ Space industry innovations already offer massive returns for the United States and other nations, and the future appears even more promising.

Beyond traditional space activities

US space companies have grown quickly, primarily through traditional space activities. Launch services, satellite communication, and manufacturing have seen the most investment and growth in recent years.⁶ While these activities are expected to continue to be important, continuing US leadership will likely also require investments in entirely new technologies and services.

Emerging space activities such as in-orbit servicing, assembly, and manufacturing (ISAM), space traffic management, space debris remediation, new military capabilities, and civil space programs, such as the Artemis program, can lead to entirely new opportunities.⁷ From larger space-based telescopes to manufacturing in orbit, what companies and governments can do in space is poised to change radically. As figure 4 shows, new space activities, like ISAM and space traffic management can help mature key business linkages within the space industry.⁸ Innovation in these emerging activities can help maintain American space leadership.

Many emerging space activities may, in part, depend on policies and available funding to help them become commercially viable. They will require more space talent, and that talent should be driven by shared purpose and passion (see “I’m not mopping, I’m putting a man on the Moon!”).⁹ These commitments can help the American space industry flourish into the 2030s.

What’s next: Growing pains and the role of continued US leadership

Preserving American leadership in the space industry’s rapid growth—and the economic and societal benefits that can come with it—will require dedicated attention from both the government and the private sector. To maintain American leadership in the fast-growing space industry—and to capture its economic and societal benefits—both the government and private companies must commit to focused efforts. This collaboration will help develop policies, regulations, and funding strategies that address challenges like rising international competition, evolving investor attitudes, and an increasingly crowded and risky outer space.

Overly optimistic investment?

In recent years, private investment (such as venture capital and private equity) and government funding have flowed into the space industry, especially in 2021, when market conditions were better for investment risk (figure 5).¹⁰ However, this rate and variety of space funding, at times, mirrored characteristics of an immature industry, sometimes defined by overly optimistic forecasts and uninformed investment strategies.¹¹

In 2022, private investments fell, reflecting a more risk-averse investment climate and a degree of disillusionment due partly to worse-than-expected financial performance and some company failures.¹² Private sector investment in the space industry bounced back in 2023, with $12.5 billion raised, nearly $3 billion short of 2021 investment highs.¹³

The recent contraction and partial recovery in space industry investments may indicate that investors are beginning to better understand the specific activities involved and how they affect the broader space industry. It also reflects the government’s increased space sector investments (figure 6). The space industry will need sustained and increasing investments to reach its growth goals, including the often touted $1 trillion valuation.¹⁴

With a clearer sense of how the private sector plans to invest in space technologies and services, the US government can consider investing in complementary ways. While industry focuses on familiar space activities, government could, for example, fund novel projects that are not quite ready for commercialization. Investments in ISAM, in-space infrastructure, and similar activities could seed important innovations until the private sector is ready to invest more, just as NASA catalyzed private investments and industry innovations through its Commercial Crew and Commercial Low Earth Orbit Destinations programs.¹⁵ 

Complexity in the regulatory environment

America’s complex web of space industry regulations can struggle to keep pace with private innovation (figure 7). Process friction, such as lack of clarity around which regulator is responsible for which activities and difficulty understanding how (if at all) new space innovations may pose risks to citizens, the environment, or national security, can jeopardize innovation and commercial growth.¹⁶ Regulatory systems often face pressure when dealing with rapidly changing technology, and due to recent space industry growth, space regulators and companies are dealing with that strain.¹⁷

The space industry presents unique challenges for US regulators due to its specialized nature and the importance of its associated technologies. Rockets, satellite communications, imaging, and other technologies and services can serve both military and civilian purposes. Additionally, testing new systems can affect communities in ways that may potentially require government oversight.

For the United States, these concerns are often more pronounced due to the scale and significance of its commercial space sector, which is a global frontrunner in space innovation and activity.¹⁸ Indeed, the largest satellite operator worldwide is a US company.¹⁹ The nation has led the world in annual orbital launches for the last four years, and 2023 represented more than half of the global total (figure 8).²⁰ As a result, the US regulatory system can influence global markets and broader space competition.

Some policymakers and space industry groups are attempting to develop new regulatory practices, particularly for emerging activities such as satellite refueling, servicing, and human spaceflight.²¹ But regulatory reform won't be a one-time fix given this fast-evolving industry.

Instead, the space industry should consider an agile regulatory system that combines formal regulation with “soft law” tools, such as industry standards and best practices, which can be shaped by both industry and government.²² For instance, a new mission authorization framework approach, which industry groups and Congress are advancing, aims to help evolve formal space regulation. Such frameworks could be complemented by new soft law tools. The ability of US regulations to keep pace with industry innovations can help determine how the space industry enhances American lives, businesses, and national security.

Preserving access to space should be a high priority

While growth in the space industry is generally positive, it also poses challenges, including space debris and orbital congestion, which can put spacecraft at risk.

Preservation of the space environment, such as critical earth orbits, is essential to the industry’s growth. As a space sector leader, the United States can have a vital role and ample motivation to lead in sustainable space practices and international cooperative efforts to help preserve the space environment.

Trash in orbit

Space debris is a pressing concern. It comprises all human-made objects in orbit that no longer function (such as defunct satellites or rocket engines) or have never functioned (such as debris from satellite breakups). There are tens of thousands of pieces of debris in orbit, and more than half of it is in low Earth orbit (LEO), where most commercial space activities occur.²³

Challenges from trash in orbit can lead to business and national security challenges. In early 2024, for example, two defunct satellites missed colliding by mere meters; a collision would have created thousands more pieces of space debris that would have posed a significant threat to the satellites in LEO.²⁴ As demonstrated in figure 9, the Earth’s orbits are becoming increasingly crowded, and the trend is expected to continue.

While removing satellites from critical orbits at the end of their operational lives is increasingly common, there’s currently no viable way to remove debris. In 2013, a group of national space agencies found that LEO was at risk of becoming unusable due to growing debris and orbital congestion,²⁵ a finding that predated the recent and enormous growth in the number of objects in LEO (figure 9).

The problem is broadly acknowledged, at least. A United Nations–proposed ban on debris causing anti-satellite weapons tests is gaining international support²⁶ and ongoing US commercial and governmental efforts aim to develop debris mitigation and remediation solutions.²⁷ Notably, the technologies needed to remediate debris are very similar to those needed for ISAM systems, meaning investments in debris removal promise to aid the development of ISAM as well.

Busy highway, no traffic rules

Orbital congestion due to the rapidly growing population of satellites poses another problem, particularly in the absence of agreed-upon rules for traffic management; increased space traffic increases the risk of collisions and debris.

The risks stemming from this lack of traffic management are expected to get worse. The number of active satellites is skyrocketing, with nearly 9,500 active satellites in orbit.²⁸ In 2023, 2,912 orbital payloads were launched versus just 123 in 2000. The current number of active satellites in orbit represents over half of all payloads launched ever (18,201).²⁹ According to industry predictions, some 20,000 satellites could be in orbit by 2030.³⁰

The risks of unmanaged space traffic can already be seen. Between 2021 and 2022, the number of predicted hazardous close approaches by satellites rose by 58%.³¹ And as more satellites occupy Earth’s orbits, the complexity of avoiding collisions increases.

Debris and orbital congestion threatens the viability of the space environment—and all the advantages space offers the United States and the global community. One challenge (and opportunity) facing the United States is leading the development of the technologies and orbital “rules of the road” needed to preserve the space environment for further development.

Increased international competition and cooperation

The space industry’s growth and promise have led to increasing international competition in the military, civil, and private spheres. Government space budgets are on the rise (figure 10), as is cooperation—as well as competition—among countries.³²

Competition can help spur government and industry investments in critical technologies and services, as it did during the Cold War space race. However, it can also lead to national security concerns, such as destructive anti-satellite weapons that can create hazardous space debris. Plus, it makes the development of norms of behavior, such as space traffic management, more complex as countries push their preferred models.³³

Talent—the need for skilled expertise—is also a component of competition. The Cold War space race led to a rise in science education and student funding opportunities,³⁴ and the current growth of the space industry and associated competition could likely do the same today with a combination of government and commercial support.

American leadership in space offers a pathway to harness international competition for industry growth. The United States possesses by far the largest portion of the space economy, including commercial, civil, and military spending, and has long been an advocate of space cooperation. It can, therefore, help lead on these efforts. The Artemis program and its associated Accords, which call for leading practices in space activities, represent an increasingly popular US-led international effort that will collaboratively return humans to the moon and set principles for cooperation in exploring space.³⁵

US leaders should consider the development of international partnerships that help fuel the growth of the commercial space sector. But this cooperation will likely require concerted government and industry actions to create a large community of like-minded partners.

Pursuit of military advantage through space

Space offers militaries key strategic capabilities, including communication, intelligence, early warning, and navigation. Space systems will likely continue to be a defining factor of military dominance. For decades, US military space technologies have enjoyed a relatively low-risk, high-reward environment since few nations pose significant threats.³⁶ Today, however, these systems have become vulnerable to advancements by other militaries seeking to develop their own capabilities and diminish US space superiority.³⁷

Threats to military space assets range from electronic warfare capabilities that can temporarily disable or degrade satellites, to missiles that can target and destroy satellites in orbit.³⁸ Some non-state actors have even used cyber tools to interfere with satellites.³⁹

A challenge the United States faces in this arena is twofold: first, to preserve its military advantages by developing more resilient space systems by, for instance, using lower-cost and more easily replaced satellites;⁴⁰ second, to prevent the increasing global competition for the military use of space from making critical earth orbits unusable—using some anti-satellite weapons, for instance, could ruin the space environment for all.⁴¹

To help address these challenges, the United States should continue growing the commercial space sector so that the global benefits space provides exceed the military ones. For the former, the commercial potential of space is clear; again, many believe it will be a trillion-dollar industry by the end of the decade.⁴² While the economic value of space can’t guarantee a prohibition on using anti-satellite systems, it could increase the risk threshold for using some anti-satellite systems since nations may be reluctant to hurt a key source of economic growth.

The United States should also continue to explore efforts to advance international cooperation. Such efforts could, for example, include the proposed moratorium on testing anti-satellite weapons that generate debris.⁴³ Also important are agreements that set norms of behavior for space activities that not only provide a safer orbital environment for commercial development, but also reduce the possibility of military miscommunication or miscalculation leading to military crises.

Pathways to flourishing: Strategies for leading renewed competition in space

The United States should consider taking several steps to help preserve its leadership in the space industry and create additional benefits for Americans and the world, including the following.

Use complementary investment approaches to accelerate industry growth

Industry and government investment can function in synergy. While private funds are gravitating toward more traditional space activities, government investment can help spur innovation in emerging areas often seen as too risky to private investors. Such investments could include:

• Space traffic coordination and management via new sensors, data standards, and rules of the road
• Debris remediation (or ISAM activities broadly) via government research and development efforts or the encouragement of industry innovation programs
• In-space infrastructure such as space stations that provide a setting for industry innovation

Where the private sector cannot yet invest with confidence, the government should consider doing so.

Drive international cooperation for innovation and norms development

International cooperation provides a vital opportunity for the United States to preserve its role within the space industry. By developing new global partnerships and commercial relationships for space technologies and services, such as satellite communications and observation, space traffic management, debris remediation, ISAM, and civil space exploration, the United States can catalyze new industry innovations and help shape international norms and laws for the space sector.

Adapt and improve regulations on an ongoing basis

An agile regulatory system that can keep pace with ever-changing space technology and services is important for industry growth and continued production of the benefits that enhance the lives of American citizens, businesses, and national security. Agile regulation requires constant learning and regulatory adaptation through trial and error and better use of soft law tools.

America’s decades-long leadership in space has helped our nation flourish, but the space industry’s spiraling growth will require the United States to adapt, which includes furthering international cooperation and adjusting investment strategies and regulations. It will take more than just one small step but the US can still produce giant leaps for humankind.