Pricing space junk: A policy assessment of space debris mitigation and remediation in the new space era
Creators: name: Buchs, Romain
Publisher: name: ETH Zurich
Year: 2020

description: Decades of space exploration and exploitation have led to congestion in near-Earth orbital space. Though space debris is already a threat for operational spacecraft, the long-term danger is a cascade of collisions rendering some orbits unusable. Modeling of the space debris environment has shown that the tipping point of this cascading effect might already have been reached. The rapidly-growing space economy is bound to exacerbate this worrying situation.

The space debris issue is shaped by the physical characteristics of space, the economics of space exploitation, and the legal framework governing space. In this report, I address these three aspects and evaluate policy alternatives for space debris mitigation and remediation. I first conduct a thorough analysis of an ongoing reform of orbital debris mitigation rules for commercial satellites in the United States focused on a command-and-control approach. I then compare four policy instruments based on the market that could be applied in the space debris context: marketable permits, regulatory fees, liability insurance, and market-share liability and disposal payments. 

Evaluating policy approaches requires data on their costs and benefits, which is largely lacking in the space debris context. The current economic impact of space debris is unknown, while the future economic impact is hard to predict. Three main reasons are identified for the cost data scarcity issue. First, damage due to untracked debris is unreported. Second, satellite operators are not transparent regarding the costs they face, e.g., for shielding, collision avoidance maneuvers, and post-mission disposal. Third, spending in Space Situational Awareness not only benefits space debris mitigation but also has military purposes. The future economic impact of space debris is even harder to predict due to the reliance on modeling, which requires strong assumptions, and due to the difficulty in estimating the total economic value we derive from near-Earth orbital space. However, there is no doubt that without action, the costs of space debris will rise significantly in the near future. Due to the slow clearing mechanism, debris accumulates in certain orbits. Space debris generated today can adversely affect space operations for many generations to come, way beyond the lifetime of the operators creating them.

Although scarce data prevents a comprehensive cost-benefit analysis from being conducted, the root causes of the congestion in near-Earth orbital space can be identified, and a suitable policy response devised. At the heart of the space debris issue is an incentive problem. Space users generate debris because they do not consider the cost they impose on others. A space user has minimal incentives to limit the creation of new debris as it bears all costs of its efforts, but the benefits are shared among all space actors. The same observation applies to the funding of remediation actions. Thus, an appropriate policy response must realign space operators' incentives and sustainability goals.

Space debris-related risks have two facets which call for different policy responses. The current debris-related risk results from past space activities and cannot be reduced by altering the space actors' incentives. Reducing this risk requires remediation and a mechanism to allocate its costs. Dealing with the historic debris population should probably rely on a state-centric approach, in the form of an international agreement to avoid free riding. Market share-disposal payments, which consist of apportioning the remediation costs proportionally with a state's current debris population, appear as an efficient approach.

Mitigating the debris-related risk resulting from future space activities requires a very different approach. In this case, the regulatory instrument must be able to incentivize actors to reduce their debris generation. Ex-ante requirements applied uniformly across operators with different compliance costs are inefficient and only partially align operators' incentives and space sustainability goals. Three market-based instruments can incentivize risk-reducing behaviors:

Liability insurance: Through risk classification and premium pricing, insurance can act as a surrogate regulation. A well functioning liability insurance market could yield the necessary incentives and requires limited intervention from the regulator. However, the weak international liability framework for in-orbit activities coupled with the remote nature of space, which prevents damage investigation, greatly hamper this solution. As premium rates are priced commensurately with the risk of a claim and not the probability of a collision, the pricing mechanism of liability insurance premium rates currently cannot induce risk-reducing behaviors.

Marketable permits: Tradeable licenses for the generation of a specific level of debris-related risk per time period could internalize the cost of debris generation. A cap-and-trade scheme is the most effective mechanism as it would limit the number of new debris created to a fixed amount. I have proposed a fungible unit of risk that would efficiently reduce debris creation. However, such a comprehensive unit of risk might be difficult to implement and increase the scheme complexity.

Regulatory fees: Space users can be required to pay a regulatory fee for the generation of debris-related-risks. The unit of risk proposed for marketable permits could also be used in this scheme. Regulatory fees offer more certainty on the compliance cost and motivate long-term investments in mitigation. The most concrete example of this instrument is the recent proposal of a post-mission disposal bond by the Federal Communications Commission. Deposit and refund scheme would incentivize operators to reduce unplanned debris creation and post-mission disposal. However, requiring a sizeable ex-ante payment could be an obstacle to innovation and new space applications. To alleviate this problem, I propose to couple a deposit and refund scheme with a periodic fee.

Multilateral action would be preferred to avoid any debris-related risk leakage from a jurisdiction with higher requirements to jurisdictions with lower ones. However, I argue that, as a first step, unilateral action from the United States could be effective as the same requirements can be applied to entities requiring access to the American market. This mechanism can prevent operators from seeking a license in countries with less stringent regulations and could help drive change abroad.