design of a methodology to evaluate the direct and ... · design of a methodology to evaluate the...

www.technopolis-group.com

7th July 2012

Design of a Methodology to Evaluate the Direct and Indirect Economic and Social Benefits of Public Investments in Space

Final report

Design of a Methodology to Evaluate the Direct and Indirect Economic and Social Benefits of Public Investments in Space

Final Report ESA Contract Reference: 4000103623/11/F/MOS

technopolis |group|, May 2012

Paul Simmonds, John Clark, Paula Knee, Marko Stermsek, Andrej Horvath, Zsuzsa Javorka

Design of a Methodology to Evaluate the Direct and Indirect Economic and Social Benefits of Public Investments in Space i

Table of Contents EXECUTIVE SUMMARY 1

Introduction 1

Methodology 1

This report - Technical Note 3 1

Impact Categories 2

Assessment Methodologies 4

Options for Implementation 6

Presentation and Use of the Assessment Outputs 7

INTRODUCTION 9

1. The Study 9

2. The Conceptual Model and Definitions 11

ECONOMIC IMPACTS 23

3. Introduction 23

4. Direct Economic Impacts 25

5. Indirect economic impacts 31

6. Induced economic impacts 36

7. Knowledge Spillovers 40

8. Market Spillovers 50

9. Economic impacts – in summary 54

ENVIRONMENTAL IMPACTS 55

10. Introduction 55

11. Environmental Policy-Making 57

12. Positive Effects on Environmental Parameters 61

SOCIAL IMPACTS 66

13. Introduction 66

14. Advances in Understanding 69

15. Strategic Impact 76

16. Space for Education 80

17. Civil Security and Protection 82

18. Defence 86

19. Externalities 89

AGGREGATING THE IMPACTS 91

20. Bringing it All Together 91

21. Presentation and Use of the Results 102

22. Concluding Remarks 107

ii Design of a Methodology to Evaluate the Direct and Indirect Economic and Social Benefits of Public Investments in Space

Table of Figures Figure 1 Schematic of space investments and impacts................................................... 2

Figure 2 Impact assessment methodologies (Option A) .................................................5

Figure 3 Options B and C .................................................................................................7

Figure 4 Mock up of a possible Space Impacts Scoreboard and Highlights table ......... 8

Figure 5 Study methodology ........................................................................................... 9

Figure 6 Logical framework: flow from investments to impacts .................................. 11

Figure 7 Schematic of space investments and impacts .................................................13

Figure 8 Impact category definitions.............................................................................16

Figure 9 Definition of economic impact categories...................................................... 23

Figure 10 Recommended methodologies: economic impacts...................................... 24

Figure 11 Breakdown of space-related patents by main domain (2000-2008)........... 44

Figure 12 Microeconomic impact methodology ............................................................47

Figure 13 Example of a linear demand curve ................................................................ 51

Figure 14 Economic Impacts: Summary Chart............................................................. 54

Figure 15 Definition of environmental impact categories .............................................55

Figure 16 Recommended methodologies: environmental impacts...............................57

Figure 17 Definition of social impact categories........................................................... 66

Figure 18 Recommended methodologies: social impacts ............................................ 68

Figure 19 Example of output from JTF industry survey ...............................................79

Figure 20 A Harding-style matrix for assessing criticality........................................... 88

Figure 21 Recommended methodologies and indicative costs (Option A) .................. 92

Figure 22 Fallback methodologies and indicative costs (Option B) ............................ 93

Figure 23 Prioritisation of impacts for assessment...................................................... 94

Figure 24 Recommended methodologies and indicative costs, for Option C.............. 96

Figure 25 Recommended methodologies – difficulties, risks and uncertainties ........ 98

Figure 26 Mock-up of a possible Space Benefits Scoreboard......................................103

Figure 27 Mock up of a possible Space Highlights table .............................................105

Design of a Methodology to Evaluate the Direct and Indirect Economic and Social Benefits of Public Investments in Space 1

EXECUTIVE SUMMARY

Introduction

This report presents the results of a study to design a methodology to evaluate the direct and indirect economic and social benefits of public investments in space.

It encompasses both a review of methodological options and available data, and concludes with a series of practicable recommendations for ESA to take forward the anticipated measurement exercise, and otherwise develop the state of the art in the evaluation of public investments in space.

The proposed methodology is broad in scope, inasmuch as it will provide the basis for an ex post assessment of all European public investments in space, while also covering all of the main types of societal impact, whether that is industrial competitiveness, advances in scientific understanding or enhanced international relations.

Methodology

The study was carried out by the Technopolis Group in a 12-month period, and entailed extensive desk research, targeted interviews with expert methodologists and peer review. It was conducted in three successive phases:

1. Phase 1: a conceptual phase to analyse the evaluation ‘problem’, define key concepts and review relevant assessment methodologies

2. Phase 2: a detailed review of available data sources in terms of their ability to support the methodologies identified in Phase 1

3. Phase 3: development of a proposal for a practicable evaluation methodology(ies), based on the outputs of Phases 1 and 2

The findings of each phase were presented in separate reports or Technical Notes. Technical Note 3 built on the definitional work and data assessment set out in Technical Notes 1 and 2, respectively, and constitutes the Final Report for the study.

This report

This report presents our proposal for a suite of linked methodologies to assess the direct and indirect economic and social benefits of public investments in space. It is intended to enable ESA to develop a specification for an important future assessment study. It also provides an overview of the outputs of the exploratory parts of the study as reported in Technical Notes 1 and 2, in order to present the conceptual model for the impact categories and explain the selection of methodologies for their assessment.

The report is structured such that the recommended methodologies are presented for each impact category in turn, following the conceptual model developed in phase 1 (as shown in Figure 7). This is followed by a discussion of the relative importance of impact categories, a prioritisation process across all impacts and the presentation of options for implementation. Finally, a process for aggregating, presenting and using the assessment outputs is proposed.

2 Design of a Methodology to Evaluate the Direct and Indirect Economic and Social Benefits of Public Investments in Space

Impact Categories

Fourteen impact categories for space investments are identified, sub-divided into three impact groups: economic, environmental and social (Figure 7). While the term ‘social impact’ can be used as an overarching term encompassing all impacts that accrue to society, i.e. all economic and other impacts, we use the term to denote a group of effects that are not directly financial in nature and are experienced by individuals or society as a whole rather than businesses. Similarly, under this definition, environmental impacts can be viewed as a sub-set of social impacts, however their importance as an impact category in the space context is such that they are considered separately.

Figure 1 Schematic of space investments and impacts

1.1 Economic Impact Categories

The six categories of economic impact are grouped into two ‘tiers’ to separate those that are (i) short-term financial effects generated as an immediate result of public funding and (ii) wider economic effects that take some time to accrue to a wider group of economic actors.

The first tier comprises three types of economic impact that arise as a result of the wages and profits generated by:

• The upstream space sector, the organisations in receipt of public expenditure (direct impact), and their supply chains (indirect impact). Direct impacts also arise in the downstream sector, the industrial users of space outputs

• The subsequent economic impact as those wages and profits are put to further use within the economy (induced impact)


Second tier economic impacts arise as a result of the diffusion and use of space infrastructure, capabilities and technologies in the wider economy, i.e. beyond the space sector:

• Knowledge spillovers occur where advances in scientific and technical understanding developed in the space sector diffuse into wider society and cross-fertilise with other intellectual endeavour and support the emergence of new innovations in various locations

• Market spillovers are the benefits accruing to producers and consumers who benefit in ‘unearned’ ways from technological advances. Producers may find they can (in the short term) sell a product or service for more than they would be prepared to accept (producer surplus – which competitive pressures tend to erode away), while consumers gain access to novel products with additional functionality not fully reflected in the price (consumer surplus)

Environmental Impacts

Space infrastructure and capabilities lead to environmental impacts as a result of the deployment of space-enabled value-added products and services by consumers, business and public agencies. The route by which space investments lead to environmental effects is typically extremely complex, involving many other actors, data and capabilities and presents a fairly difficult assessment challenge. Therefore environmental impacts are sub-divided into an ‘intermediate’ and ‘final’ stage in the chain of inputs to impacts:

• Environmental policy-making. Space-derived data contributes to (i) the identification of environmental problems or issues; (ii) the formulation of environmental policies; and (iii) the effective implementation of those policies

• Positive effects on environmental parameters. The objective of environmental policies is the protection and improvement of the environment and therefore space investments contribute to the intended environmental impacts such as levels of greenhouse gases in the atmosphere, biodiversity, forest cover, air/water quality, etc.

Social Impacts

Investments in space generate a range of social effects including both those that are intended such as advancing scientific understanding or improved social wellbeing through defence and civil protection, as well as effects that are more indirect, and that may be intended or unintended to different degrees, such as international prestige and influence, inspiring the public and encouraging young people to study science and engineering. As a result, social impacts are highly varied, with different effects in terms of who they affect (individuals, nations etc.), what they affect (the knowledge stock, human health/lives, international prestige) and the scale of the contribution of space investments to what are typically much larger concerns.

The social impacts are defined in the following six categories, however it should be noted that the list is not exhaustive:

• Advances in understanding – contributions to the stock of human knowledge, in particular to our understanding of our planet, the solar system and universe

• Strategic impact – in terms of geopolitics, whereby a space-faring nation or region experiences enhanced international prestige and influence and non-dependence (i.e. European self-reliance as regards access to space and critical space-derived services)

• Space for education – inspiring young people to study science, technology, engineering and mathematics (STEM) subjects and pursue careers in science and technology


• Defence – contributions to the enhanced protection of citizens through the increasingly pervasive use of space-enabled communication and surveillance systems

• Civil security and protection – through, for example, protecting citizens from natural and man-made disasters and situations

• Externalities – so-called ‘free’ benefits resulting from space, such as: contributing to a sense of European identity, global cultural awareness and digital access and social inclusion

Assessment Methodologies

Having defined a long list of important types of impact, the study team went on to review the sorts of methodologies available to trace and quantify socio-economic impacts. The evaluation literature reveals a wide range of methodologies in use, from individual case studies to more comprehensive cost benefit analyses. Most impact assessments relate to a specific public policy or programme, where there are quite specific objectives and related activity, and result in some kind of judgement on the sufficiency or effectiveness of a given policy.

Here, the methodological aim is more ambitious, encompassing all sources of public investment and all types of impact. Conventionally, this kind of complex socio-economic system would be studied using macro-economic models developed over many years with very substantial investment by government and run by statistics agencies or other national institutions. Individual economic sectors tend not to figure prominently in such macro models, and where relevant models have been constructed to treat space explicitly, they are still at an early stage of development, they do not have the scope required. These models may develop into a singular, integrated methodology, however that will take many more years of conscious development effort and empirical expansion and calibration.

For the time being at least, the team concluded that any overarching evaluation methodology must be a conglomerate of different assessment elements focusing on the individual impact types or possibly groups of closely related impact types (e.g. economic). It was also concluded that the overall approach would need to combine both quantitative statistical methods to count and monetise inputs and outputs where possible, as well as qualitative methods, better suited to capturing and conveying various important strategic and cultural contributions.

On balance, we concluded that the first tier economic impacts were reasonably well addressed by available methodologies, albeit current data sources have certain important gaps, but that there were methodological and data shortcomings for almost all types of wider economic, environmental and social impacts.

Figure 2 takes this idea of a conglomerate approach quite literally and presents what we consider to be the best methodology for each of the 14 impact categories. In each case, we have proposed what we consider to be a practicable approach, albeit entailing a degree of development effort. We call this Option A, which is the full set of our preferred methodologies. The implementation requirements are described in full in the main body of the report.


Figure 2 Impact assessment methodologies (Option A)

Impact Methodological approach (Option A)

ECONOMIC: Direct Extensions of current surveys to include: • Universities, public research institutes and internal Agency activities • Sampling of downstream sector, to better define the downstream sector • Reconciliation of data on funding with that on recipients’ sales, using Euroconsult

global statistics on public funding agencies

ECONOMIC: Indirect

Creation of input-output coefficients for a bespoke space sector, based on existing data supplemented by extension of current surveys to include information on volumes and sources of supplies into the space industry

ECONOMIC: Induced

Extension of current macromodels, to incorporate a bespoke space sector (consistent with suggested developments on indirect impact)

ECONOMIC: Knowledge spillovers

• Improved identification of cases of spillovers at national and EU levels • Improved data collection to capture more data on costs and benefits • Rolling programme of in-depth case studies of known examples, with estimation

of gross and net (inclusive of opportunity costs) benefits • Use of OECD space patenting information to (a) highlight particular spillovers for

investigation and (b) enable citation analysis for levels and trends in cross-fertilisation between space and other sectors

ECONOMIC: Market Spillovers (producer & consumer surplus)

• Structured compilation of major publicly-funded space initiatives from which novel devices or services are known to have been derived

• Analysis of the results of the benefits of these devices or services in terms of market penetration, and per-unit benefits to consumers and producers accruing over time, along with use of net-present-value and discounting procedures

• Inclusion of assessment of consumer and producer surpluses from new developments, as a routine component of ongoing programmatic and system level evaluation of public investments in space

ENVIRONMENTAL Environmental policy-making

For impacts on policy makers and policy making • Design, test and implement a new periodical international survey of

environmental policy-makers and other actors to determine people’s perceptions of the role of space investments in (i) identification of environmental problems; (ii) policy development; and (iii) policy implementation

• Design and implement a rolling programme of in-depth historical ‘tracking back’ case studies that reveal the nature and extent of space contributions to specific and important environmental policies or treaties

ENVIRONMENTAL Positive effects on environmental parameters

For impacts on environmental parameters, combine micro and macro approaches: • Detailed case studies of identified benefits (micro level) • Application of the FeliX model to space investments (macro level)

SOCIAL: Advances in understanding

Bibliometric and citation analyses • Profile the volume and international standing of European space research using

Web of Science (WoS) bibliometric data

• Trace influence of space research on other disciplines, using bibliometric citations • Institute a rolling programme of discipline-level reviews

SOCIAL: Strategic impact

For geopolitics: • Network analysis based on UN database of international space treaties For non-dependence • Analysis of secondary data collected in the ESA, EDA, EC Joint Task Force • Case studies of technologies that have been transformed by public investments

from ‘dependent’ to ‘non-dependent’

SOCIAL: Space for education

‘Eurobarometer’ poll of European scientists and engineers to assess influence of space on their career choices as compared with other possibly important triggers Rolling programme of case studies to determine the cognitive and inspirational impact on young people of specific space-related educational programmes or visitor attractions and simulations


Impact Methodological approach (Option A)

SOCIAL: Civil security and protection

Mixed methods - a combination of a micro and macro approaches: • Detailed case studies of identified benefits (micro level) • Application of the FeliX model to space investments (macro level)

SOCIAL: Defence Rolling programme of case studies to determine the functional and economic improvements realised through the use of next generation space-enabled services, including assessment of the extent to which key aspects of military capabilities are now critically dependent on space

SOCIAL: Externalities

Eurobarometer-style opinion survey to assess willingness-to-pay for specific externalities

Options for Implementation

Implementing all of the proposed methodologies in Option A would be costly, given the development effort implied. Therefore two other options were prepared. The first, Option B, is based on making use of existing or ‘fallback’ methodologies where they exist. Option C presents a targeted approach whereby the impact categories have been prioritised based on their relative importance, the availability of acceptable ‘fallback’ methods and the potential improvement gained by the proposed new methodology. The result would still entail a substantial amount of development effort, however the proposal is to target the very poorly represented but important impact types. In particular, we recommend devoting most effort to the extension of the overall methodology to encompass (i) the spillovers that result from space technologies and space-enabled applications and (ii) the non-economic social effects in education, science and international relations.

In summary:

• Option A: Implementation of a wide-ranging programme of methodological development projects in order to support measurement improvement in all impact categories (indicative cost: €3M-€5M)

• Option B: Implementation of a ‘light-touch’ approach, which relies on existing data and methodologies as described in the ‘fallback’ approaches in Figure 24 (indicative cost: €400K-€500K)

• Option C: Implementation of a ‘middle’ approach, which works through the menu of impact types picking from Options A or B based on a judgement as to the need for more and better data and the tractability / value for money represented by the implied methodological improvement (indicative cost: €2M-€3M)

Figure 24 presents Options B & C. Option C is presented in terms of whether it requires the implementation of the proposed methodology as contained in Option A or the ‘fallback’ methodology as contained in Option B. Plus, for a number of impact categories it is suggested that no assessment be made. The resulting Option C solution focuses on the impacts where space makes a particular contribution that is tangibly different from other sectors and other forms of public investments – such as the knowledge spillovers resulting from investment in R&D and the social and environmental impacts resulting from the application of the very specific capabilities of space. By contrast the first tier indirect and induced economic impacts are not unique to space and alternative assessment approaches and appropriate data exist. Therefore it is possible to assess these impacts without developing space-specific methodologies and data. However the direct impact on the space sector itself and on the downstream sectors remains incomplete and open to significant improvement.

While Option B promises a much lower implementation cost, it would result in a significant reduction in coverage and robustness as compared with Option A. In terms of coverage the assessment would almost entirely focus on the economic impacts, leaving the environmental impacts and most of the social impacts not assessed. Furthermore, this option does not move forward the state of the art in assessment of


the benefits of public investments in space and neglects many of the important impacts particular to space.

Figure 3 Options B and C

Impact Option B: Fallback approach

Option C: ‘Middle’ approach

ECONOMIC: Direct Estimates based on data from current surveys of European industry

Option A

ECONOMIC: Indirect Use of existing estimates of indirect effects, using standardised factors (‘multipliers’) for other sectors applied to measures of direct impacts for space

Option B

ECONOMIC: Induced Use of ‘rules of thumb’ or averages or ranges of values derived from available macroeconomic models

Option B


Use of existing estimates of the importance of knowledge spillovers, assuming the space sector to be typical (in terms of spillovers) of sectors where such studies have been carried out.

Option A

ECONOMIC: Market Spillovers (producer & consumer surplus)

Use of available estimates of costs and benefits, including profits and price-reduction opportunities and quality improvements, of existing or planned initiatives where major studies have already been carried out, such as for GMES and Galileo

Option A


There are no substantial existing alternatives Option A


There are no substantial existing alternatives Option A


Bibliometrics with much narrower disciplinary focus

Rely on space journals to conduct disciplinary reviews

Option B


There are no existing alternatives Option A


Synthesis of a number of very different and quite patchy qualitative studies

Option A


There are no existing alternatives No assessment

SOCIAL: Defence There are no existing alternatives Option A

SOCIAL: Externalities There are no existing alternatives No assessment

Presentation and Use of the Assessment Outputs

While the results of an assessment of each impact category are in and of themselves useful, it is clearly desirable to aggregate and present the results as a whole. However, the scope of the assessment – covering a diverse range of impacts - means that no single metric can be applied across all categories. While a number of the environmental and social impacts can be converted into economic metrics, the majority cannot be monetised or simply result in qualitative assessments. Even with the proposed programme of methodological development, the impact assessment procedure will not be able to integrate all benefit streams; there cannot be a single ‘number’ that quantifies the total impact of public investments in space.

This may be possible in the longer-term, as space-specific macro models mature and empirical data accumulate to the point one might more confidently begin to monetise various intangibles.


As a solution for the medium term, a Space Impacts Scoreboard is proposed. Figure 27 presents a mock-up of a possible suite of quantitative indicators and qualitative highlights that might form the basis for a public report, which could be released following the completion of the latest assessment round. We anticipate the first assessment may produce results for the recent past (annual, current ministerial cycle) and possibly an historical and accumulated picture (post-1975). The scoreboard approach would also lend itself to the methodology being repeated periodically, perhaps every two years, so that trends could also be revealed and commented on.

It is suggested that particular presentations should be developed for different audiences, for example, the general public, ESA and Europe’s space agencies and Europe’s finance ministries. The content of each presentation would need to be defined in discussion with each of the audiences, however at this stage, we assume that moving from left to right, from the public to the finance ministries, would require an extension in the number of metrics and the technical nature of the commentary. The figure below presents a treatment of the results designed for the general public.

Figure 4 Mock up of a possible Space Impacts Scoreboard and Highlights table

Space indicators (Quantitative) Space highlights (Qualitative) Context and inputs Context Total public investment in civil space Major new space missions / programmes

launched

Number of space missions flying or in development Major new sales to international customers

Spend on space education (space for education) Major new mergers and acquisitions

Number of current and new international agreements Major new mergers and acquisitions

Economic Economic Value of measurable economic effects Notable space-related spinoff companies

Number and financial value of spinoffs from space Major new services / markets linked with space

Number of space engineers in employment Major new process innovations / savings

Environmental Environmental % of policy-makers that judge space to be critical to environment

Major new environmental initiatives linked with space

% of population that judge space to be critical to environment

Social Social % of space research articles that >2X world citation rate

Major scientific breakthroughs

% of population that judge space to be of strategic importance

Major new inter-governmental agreements

New educational programmes

Major new social benefits


INTRODUCTION

1. The Study

Technopolis was commissioned by ESA to undertake a study to design a methodology to evaluate the direct and indirect economic and social benefits of public investments in space. The aim of the study was to: propose a methodology or methodologies that could be applied to make such an evaluation; consider the basis for their implementation; and discuss what type of results could be achieved.

The methodology was intended to address the benefits of past public investments in space and as such was to provide an ex post assessment of benefits. Furthermore the scope of the assessment was intended to be broad covering all forms of impacts that might arise as result of public investments in space.

The study was defined in three sequential work packages. Firstly, an analysis of the evaluation ‘problem’, definition of key concepts and review of available assessment methodologies. This was followed by a detailed review of available data sources in terms of their ability to support the methodologies identified. Finally, based on the previous work packages, the development of a proposal for methodology(ies) for future activities to conduct the evaluation.

1.1 Methodology

The study was conducted by a team of consultants at Technopolis with extensive experience of designing and conducting evaluations and assessments of public investments in science, technology and innovation.

The study methodology (Figure 5) was based on inputs from the academic and grey literature, and interviews with external experts (in methodological approaches, data collection and assessment) combined with extensive desk research and team workshops. The study was an iterative process with the study team meeting regularly to identify and define key concepts and impact categories, develop intermediate tools for the assessment of methods and data, and to present and justify recommendations.

Figure 5 Study methodology


1.2 Structure of the report

This final report presents a proposal for an overarching methodology, in fact a suite of linked methodologies, which is intended to serve as the basis for ESA specifying an important future measurement study whereby it will commission one or several contractors to evaluate the direct and indirect economic and social benefits of public investments in space in Europe.

It is based on the work carried out in the final phase of the study, which developed the findings from two previous work packages, set out in the respective technical notes:

• TN1 defined the key concepts and space impact categories and also identified a long list of potential assessment methodologies, from cost benefit analyses to input-output models to qualitative research methods and case studies

• TN2 presented the study team’s review of available data sources and the extent to which there were relevant and accurate data available to feed or implement the methodologies identified in TN1

The final report has evolved from what was originally, Technical Note 3, and is structured as follows:

• Chapter 2 presents the conceptual model and the definitions of the impact categories

• Chapter 0 presents a summary of the review of assessment of available data

• The subsequent chapters present the proposed methodology(ies) for each of the impact categories:

− Chapters 3 to 7: economic impacts

− Chapters 10 to 12: environmental impacts

− Chapters 13 to 19: social impacts

• Chapters 20 and 20 present our proposal for integrating the methodologies and for presenting the outputs for each of the impact categories


2. The Conceptual Model and Definitions

2.1 Introduction

Historically, public investments provided the impetus for the development of European capabilities in space and underpinned growth in the corresponding industrial base. Today, while investments in space come from both public and private sources, the public sector remains a critical source of funding, supporting space research, technology development, service demonstration and infrastructure deployment.

In Europe, public investments in space are dominated by the European Space Agency and national space agencies. There are however several other important sources of public investment, whether that is international bodies like the European Commission or EUMETSAT or regional agencies striving to support economic development through support for their local space cluster. In some countries, these civil programmes are complemented by substantial additional investments from defence ministries. The great majority of this investment is directed to the European space sector, which is to say the private businesses and public research organisations that design, build and fly space missions. It also includes the space agencies themselves, a proportion of which conduct substantial space activities in-house, whether that is carrying out research or running missions. Overall, we see the following activities:

• Produce and operate space infrastructure and systems

• Conduct technology development and service demonstration

• Conduct space-based research

• Administer space budgets

Figure 6 Logical framework: flow from investments to impacts

These activities result in physical space-based systems and services and new knowledge that can then be deployed by a wider group of economic actors for further


economic and social purposes. This flow of investments (inputs) through activities and outputs to impacts is illustrated as a logical framework in Figure 6.

The logical framework is a useful tool to structure the conceptualisation of the route between public investments and impacts and, in the study, guided the literature review to identify and define impacts.

2.2 Definition of Impacts

Impacts were identified through a combination of: (i) review of the academic and grey literature concerned with public investment in space, ranging from European and national policy documents and their supporting arguments to individual studies of space policies and programmes areas; (ii) our own previous studies of the impacts in the space field; and (iii) and our wider knowledge and understanding of the literature in science, technology and innovation studies. Key areas of space activity such as Earth observation, satellite navigation, satellite communication and space-based research were studied in some detail and impacts identified across all areas were compared and consolidated.

Fourteen impact categories were identified, sub-divided into three impact groups: economic, environmental and social benefits. While the term ‘social impact’ can be used as an over-arching term encompassing all impacts that accrue to society i.e. all economic and other impacts, we use the term to denote a group of effects that are not directly financial in nature and are experienced by individuals or society as a whole rather than businesses.

Figure 7 presents a model of these 14 impact categories, showing their links to specific economic actors. This schematic and the 14 impact categories form the basis of the proposed methodology to assess the benefits of public investments in space. The impact categories are described in a little more detail in the following sub-sections, with the definition for each impact category presented in a summary table towards the end of the section (Figure 8).

2.3 Economic impact categories

We identified six types of economic impact which we grouped into two ‘tiers’ to separate those that are (i) short-term financial effects, generated as an almost immediate result of public funding and (ii) wider economic effects that take some time to be generated and accrue to a wider group of economic actors.

2.3.1 First tier economic impacts

The first tier comprises three types of economic impact that arise as a result of the wages and profits generated by:

• The upstream space sector - the organisations in receipt of public space (direct impact) and their supply chains (indirect impact). Direct impacts also accrue to the downstream sector, that is, the industrial users of space outputs

• The subsequent economic impact as those wages and profits are put to further use within the economy (induced impact)

It is important to note that these immediate (or first tier) financial impacts apply to any area of public expenditure, irrespective of economic sector and irrespective of the value of outputs, i.e. the goods and services resulting from the expenditure. The impacts from these three categories may be similar whether the expenditure is undertaken to address an important social need (such as education, healthcare or defence), for activities with a more indirect benefit to society (such as R&D) or even for an activity that is ‘useless’ in its direct output. However, space is a ‘special case’ in one respect: we are including the value-added of the downstream sector, which is derived largely from exploitation of data produced by publicly-funded activity in the upstream sector, in the ‘direct’ category.


2.3.2 Second tier economic impacts

By contrast, wider economic (second tier) impacts of space, as compared to any other public investment, longer-term impacts, are dependent on how public investments are used. Public investments in space stand apart from public investment in other infrastructures and public services inasmuch as a very substantial proportion of that total undertaking is given over to R&D in order to develop knowledge and technology for future exploitation. Other streams of substantial public investment, for example in transport or education, are very much more mature and dominated by service delivery, rather than technology, and service development. Furthermore, space infrastructure provides data and/or services that can be utilised by other economic actors to develop innovative products and services for a wide range of end-users. Together, R&D investments and the development of downstream products and services leads to longer-term economic impacts in terms of economic spillovers.

Figure 7 Schematic of space investments and impacts

The second tier impacts comprise three further types of economic impact: consumer and producer surplus (together known as market spillovers) and knowledge spillovers.

2.3.2.1 Market spillovers

The downstream sectors develop innovative value-added products and services based on space infrastructure (SatNav, SatCom and EO systems) that are either entirely new or superior to those that they replace, offering enhanced performance and


functionality or supporting entirely new activities by their users. However, as a result of market forces the price does not reflect the full value of these new /superior products and services, leading to an economic gain or market spillover for users in the form of a consumer or producer (if the user is a business) surplus. For example, the performance and functionality of personal computers has increased substantially over the last 10 to 15 years due to technological developments but the purchase price (in real terms) has decreased.

In addition, downstream businesses generate first tier impacts via their own wages and profits and so contribute additional first tier impacts. The value of these products and services may well be larger than the space sector itself.

2.3.2.2 Knowledge spillovers

An implication of the high levels of R&D associated with public investments in space is that investments in space may produce very substantial additional economic benefits, through for example knowledge spillovers, as compared with other arenas of public investment, such as roads. The knowledge generated from space R&D and, to some extent space production more generally, cannot be entirely appropriated by those conducting the knowledge generating activities, leading to free information or knowledge spillovers for others to deploy for innovative purposes.

Knowledge spillovers occur when the advances in scientific and technical understanding diffuse into wider society and cross-fertilise with other intellectual endeavour to support the emergence of otherwise impossible innovations in many and various unexpected locations. They arise from ‘knowledge created by one agent used by another without compensation, or with compensation less than the value of the knowledge’ (Jaffe 1996)1. This spillover effect can be intentionally facilitated by the knowledge generator e.g. in scientific publications or hindered by the use of patents. However patents, while protecting the inventor from direct commercial exploitation of an invention, also require the disclosure of knowledge that may be applied by others in new and different applications. In practice, any commercialised products or services involving new knowledge are potential sources of knowledge spillovers.

As well as covering knowledge embodied in products and services, the term ‘knowledge spillover’ might also be used to include knowledge ‘embodied’ in a researcher moving from one employer to another, the latter exploiting the stock of know-how the researcher brings with them. In short, knowledge spillovers capture know-how transmitted to others mainly through four ‘Ps’: publications, patents, people and products.

In the space sector, knowledge spillovers can lead to impacts not just in non-space sectors but also in other businesses in the space sector and within space companies themselves. Many space companies are divisions of larger businesses, typically in the wider aerospace and or defence sectors, thus providing opportunities for internal knowledge spillovers to lead to successful commercialisation of ‘spin-off’ products for other business divisions. In this case companies may be able to produce substantial private returns from the public support for space R&D.

2.4 Environmental impact categories

Environmental impacts come about as a result of the deployment of space-enabled value-added products and services by consumers, business and the public agencies. Investments in space infrastructure provide either data (about the Earth’s atmosphere, oceans, land cover etc., scientific data on the solar system/universe, position and time etc.) or capabilities (communications, access to space etc.) that are used by

1 Jaffe, A.B. (1996), Economic analysis of research spillovers: Implications for the Advanced Technology Programme’, mimeo


individuals, the public sector and businesses for activities that intentionally or unintentionally lead to environmental effects.

Earth observation from space for example, has explicit environmental objectives and therefore intended environmental effects through its contribution to an improved understanding of the environment, improved environmental policy-making and methods to monitor environmental features in support of environment policies. For investments in SatNav, SatComs and space R&D, any environmental impact is unintentional and a result of downstream applications that lead to reduced emissions, energy efficiency etc. or due to spillovers where technologies developed for space are used in other applications and sectors such that they lead to environmental benefits.

These different ways by which space investments can lead to environmental impact are categorised as follows:

• Environmental policy-making. Space data (from EO in particular) contributes to (i) identification of environmental problems or issues that require action; (ii) the formulation of environmental policies; and (iii) the effective implementation of those policies

• Positive environmental effects on environmental parameters. The objective of environmental policies is the protection and improvement of the environment and therefore space investments contribute to the intended environmental impacts such as levels of greenhouse gases in the atmosphere, biodiversity, forest cover, air/water quality, etc. In addition downstream applications and knowledge spillovers may also lead to positive environmental impacts – for example reduced vehicle mileage due to the use of SatNav for efficient routing and fleet management. These impacts are typically unintended effects whose prime goal is economic (e.g. reduction in costs through efficient fleet management)

In a sense, environmental impacts are a means to an end in that they eventually lead to economic or social impacts (e.g. human health benefits due to better air quality or economic impacts of mitigating climate change). However we include environmental impact as a category in its own right for two reasons: firstly the link between environmental impacts and social and economic ones is often not straightforward and therefore it makes sense to consider this important ‘intermediate’ stage in the chain of inputs to impacts; and secondly, protecting the environment for its own sake (as well as for economic and other social reasons) is a clear goal of public policy.

2.5 Social impact categories

Social impacts cover a wide range of domains where space has an effect. These are highly varied in nature including those that are a direct and intended output of space investments such as advances in scientific understanding as well as those that accrue through the deployment of downstream services in areas such as the health and protection of citizens. In addition, space contributes to a number of more oblique, but nevertheless important, impacts such as geopolitical influence, inspiring and educating young people and European autonomy.

These impacts are highly varied, with different effects in terms of who they affect and what they affect and furthermore, the contribution of space investments to these wide impact domains is likely to be fairly difficult to discern and be relatively small.

We have identified six social impacts, however the list is not exhaustive:

• Advances in understanding – the impact of using space-based systems to conduct scientific research about the Earth, the solar system and the universe, for example the International Space Station or the Hubble telescope

• Strategic impact – the geopolitical influence gained as result of being a space-faring country or region

• Space for education – the inspirational and educational effect on young people, encouraging them to study and possibly pursue careers in science and engineering


• Defence – the impact of deploying space systems to create enhanced defence capabilities in communications, navigation and surveillance

• Civil security and protection – the deployment of space systems to protect or improve human lives such as using Earth observation to predict and respond to natural disasters, the use of satellite communications to provide healthcare in remote regions

• Externalities – non-market benefits gained ‘free of charge’ as result of space activities such as a sense of European identity though common space activities, cultural awareness as result of wider communication networks

2.6 Impact categories and indicators

Figure 8 presents a definition for each impact category and the quantitative indicator with which it can be assessed. Where there is no quantitative indicator, a brief description is provided of the nature of the qualitative assessment that could be made.

As would be expected, the economic impacts will be assessed in terms of the standard economic metrics: value-added and jobs. The environmental and social impact categories do not have a similar set of well-defined and internationally agreed indicators. In the environmental domain, indicators exist for specific environmental parameters such as levels of greenhouse gases, areas of forest protected or land available for agriculture etc. Some of these indicators may be convertible into financial figures that represent the value of the environmental parameter in its own right (such as the various measures to value carbon) or in terms of its subsequent effect on economic or social factors (such as GDP). However, in most cases there is not a well-defined or agreed conversion factor.

Figure 8 Impact category definitions

Impact category Definition

Quantitative indicator(s)

ECONOMIC Direct

An immediate financial impact that results from the public sector purchasing goods and services from economic actors in order to develop and operate space-related functions. Also included are income flows generated in downstream space sectors directly dependent on data generated from publicly-financed upstream initiatives. A direct impact will also be generated by the expenditure on space administration.

These impacts are essentially reducible to the flows of income and direct employment (wages) and profits they support.

• Valued-added (€)

• Employment (no. of jobs)

ECONOMIC Indirect

A financial impact that results from the public sector making purchases in the space sector, wherein space companies make contingent investments and purchases from their supply-chain in order to meet their public sector orders. This supports additional jobs and profits in the supply-chain.

This impact will also be generated by the downstream sectors as space infrastructure is utilised for further economic activity.






ECONOMIC Induced

A financial benefit that results from the spending by individuals in receipt of wages / salaries from employment generated by the public sector making purchases in the space sector, whether this be from wages paid directly by the space sector, or from wages paid by their suppliers as a result of orders made by the space sector. Various areas of the economy are thereby stimulated through income (or ‘Keynesian’) multipliers.

This impact will also be generated as a result of the spending of those employed in the downstream sectors.



ECONOMIC Knowledge spillovers

This impact arises where the advances in scientific and technical understanding developed in the space sector diffuse into wider society and cross-fertilise with other intellectual endeavour and support the emergence of otherwise impossible innovations in many and various unexpected locations.

• Valued-added by new products/services (€)

ECONOMIC Market spillovers

These impacts arise from ‘leakage’ of benefits through the operation of market forces, which tend to cause some of the benefits from a new product or process to accrue to buyers. Competitive pressures mean that prices do not fully reflect the ‘willingness to pay’ of purchasers. This can produce consumer or producer surplus, the former representing benefits accruing to the buyer, the latter to the seller. Thus consumer surplus is the difference between the price that the consumer is willing to pay and the actual price paid and producer surplus is the difference between the price at which a product is sold and the lowest price at which the producer is prepared to sell.

• Differences between actual and acceptable prices (€)


The contribution of space investments to: • Identification of environmental problems/issues

that require policy action

• The development of appropriate policies to protect /preserve the environment

• The effective implementation of environmental policies (e.g. monitoring environmental parameters)

• Number of policies created (wholly or in part) as result of new knowledge/understanding from space investments

• Number of policies whose implementation is dependent (wholly/ partially) on space investments/infrastructure

• Number of policies in development dependent (wholly /partially) as result of new knowledge/understanding from space investments


The contribution of space to improvements in environmental parameters, arising for example from: • Implementation of environmental policies

• Positive environmental effects resulting from downstream applications and/or spillovers

Environmental parameters, including: • Greenhouse gas emissions • Areas of forest cover • Areas of productive land

(for agriculture) • Biodiversity / ecosystem

services metrics • Etc.




SOCIAL Advances in understanding

Contributions to the stock of human knowledge – in particular to our understanding of our planet, the solar system and universe

• Volume and international standing of European space research outputs, based on bibliometric indicators such as citation scores

• Qualitative accounts of key scientific achievements and contributions to the status of knowledge for discrete bodies of space research

SOCIAL Strategic impact

Geopolitics - fostering positive international relations and enhancing international prestige and influence – in the form of: • International cooperation – closer ties between

countries through space-related collaborations

• Cohesion – closer ties within Europe through space-related collaboration

• International prestige and leadership– due to excellence in space science /engineering and using space to support development goals

Non-dependence – ownership and self-reliance in space systems, technologies, data and space-derived services, leading to: • Autonomy – freedom to design, implement and

use space systems to meet Europe’s needs

• Constant access to necessary data/information provides diplomatic security and enables strategic planning

• Authority – in international negotiations through access to own data sources plus ability to make informed decisions through access to own independent and high quality data

Geopolitics: • Main output is

qualitative: the position of Europe with respect to other countries in terms of its geopolitical influence as demonstrated by international space agreements

• Some quantitative indicators related to position within the network (e.g. centrality, betweenness)

Non-dependence: • Number of vulnerable

technologies and change over time

• Qualitative: describing the role of public investments in transforming vulnerable technologies to ‘non-dependent’ status

SOCIAL Space for education

Inspiring young people to study science, technology, engineering and mathematics (STEM) subjects and pursue careers in science and technology.

Percentage of current scientists and engineers whose career choices were strongly influenced by space

SOCIAL Civil security and protection

Protecting citizens from natural and man-made disasters and situations, through, for example: • Improving disaster prediction and crisis

management

• Border surveillance for civil purposes • Emergency communications backup

• Number of lives saved

• Number of Quality Adjusted Life Years (QALY)

SOCIAL Defence

Contributions to the protection of citizens though use of space systems, including capabilities in: • Military communications

• Border surveillance • Navigation • Intelligence (espionage) • Protecting space assets

Qualitative assessment of extent of reliance on space technologies by the military

SOCIAL Externalities

‘Free’ benefits as results of space investments/ activities, such as: • European identity

• Cultural awareness and access

• Digital inclusion

• Communicating from remote locations

Financial value of externalities in terms of willingness-to-pay


2.7 Review of Available Data

2.7.1 Introduction

During the study, 121 data sources were identified as potentially relevant as inputs to methodologies to assess the impacts of public space investments. These were examined in greater detail to determine their relevance and suitability for future use (and reported in TN2). Among the 121 sources, there were only a small number of independent secondary datasets with most being data sets collected for one-off studies of particular impacts (or as is often the case, examples of particular examples of particular impacts) or studies that made use of a combination of secondary and primary data. The process of examination revealed that there are very few independent secondary datasets available that can be used ‘as is’, i.e. without additional data collection, to assess the impacts of space. Therefore the methodologies proposed will require considerable levels of primary data collection.

A brief summary of the situation regarding the data available for each impact domain (economic, environmental and social) is presented below.

2.7.2 Data for the assessment of economic impacts

The set of first tier of economic impacts (direct, indirect, induced) is the area best covered by secondary independent datasets. However even here, there are limitations to the data available. The key point being that the three impact categories are related as the quantification of the direct impact feeds into models to estimate the indirect and induced impact, and therefore any limitations in the assessment of the direct impact feeds into the others. As discussed in more depth in chapter 4, there is no single data source that provides a complete assessment of the direct impact and therefore this aspect of data collection needs to be resolved before robust assessments of the indirect and induced impacts can be made.

For the second tier economic impacts (market and knowledge spillovers), data is very limited. Data is available for either very particular examples of impacts (and in fact very few of these exist), or in a standardised and generic form (e.g. spillover multipliers). The former presents issues in terms of applicability to other circumstances while the latter raises concerns as to relevance and robustness.

2.7.3 Data for the assessment of environmental impacts

Data to assess the contribution of public space investments to environmental parameters are extremely limited. While secondary independent data exist for a number of key environmental parameters (such as those collated by international agencies) they are not sufficient to enable an assessment of the role of space in any changes that have occurred. Furthermore, there is limited data available to enable a robust attribution of changes in environmental parameters to space investments and therefore this impact category presents a considerable assessment challenge.

The intermediate environmental impact category, the role of space investments in environmental policy-making, presents its own assessment challenge. In this area there are only a very small number of descriptive studies and no quantitative data.

2.7.4 Data for the assessment of social impacts

Social impacts are highly varied, addressing a wide range of different, and often intangible, societal features. Therefore not only is there no single indicator to encompass all impacts, furthermore, even the identification of suitable indicators is problematic. As a result the social impacts of space investments are rarely studied in a quantitative manner. Instead, studies tend to focus on highly particular examples of impact and make use of qualitative data and bespoke analytical treatments.

To extend the assessment of datasets, the search was widened to include parameters that could be of relevance but not specifically directed at space. Even so, datasets are


limited and the assessment of social impact will require the collection of a considerable level of primary data.

2.8 Additionality

2.8.1 The issue of ‘additionality’

A primary consideration for policy is the extent to which the impacts of space activity derived from public investments are additional. This concept has the following aspects:

• Impacts generally result from multiple causes. Within benefits identified as at least partly due to space-based activity, there is a need to assess the proportionate contribution of that activity (the ‘attribution problem’)

• Within the space contribution, it may not be the case that all outputs derive from, or actually required, public investments; a proportion of the output (the ‘deadweight’) might have been achieved from other funding sources (particularly private company resources) had the public investment not been forthcoming

• Subtracting off the ‘deadweight’ and any contributions from non-space activities give a measure of the impact (value added) of public investments in space. However, the contribution of space activity can be considered not only in terms of these (gross) benefits, but – perhaps more importantly – in terms of the degree to which they are over and above the benefits available from equivalent expenditures on alternative areas of public investment, or from what would have happened without such expenditures (net benefits)

The first of these is much more of an issue for some categories of impact than for others – it does not apply to Tier 1 economic benefits, for example. Its importance is considered below with reference to other particular impact categories.

With respect to the second category of additionality, the vast majority of previous studies have been concerned exclusively with gross benefits, sometimes in comparison to costs – space expenditure of €1m may be estimated to increase GDP by €Xm, for example, giving a benefit/cost ratio of X. Valuable as such studies may be, they do not provide evidence for the possible comparative advantage of investments in space compared with investments in other areas2. What is (ideally) needed is a tool for comparing benefits of space expenditures with specified alternatives, or with none (implying lower overall public expenditures, with potentially lower tax burdens or a reduced government borrowing requirement).

The final aspect of additionality relates to the extent that space has characteristics that make it different and separable from other areas of publicly funded activity and therefore making public investment particularly worthwhile. The particular characteristics of the space sector include:

• A relatively high skill intensity among workers in the space area

• A high R&D intensity, with a disproportionately high proportion of the effort directed at the ‘development’ rather than the ‘research’ end of the R&D spectrum. This suggests that the primary focus of space R&D is towards practical (but not necessarily market-oriented) application

• The importance of a ‘downstream’ space sector, exploiting and adding value to information generated by activity in the upstream sector

2 It seems to be an almost universal conclusion of evaluation studies of public support for private industry, (particularly for R&D), in any area of the economy, that the overall benefit/cost ratio is positive. In this regard, the UK Treasury ‘Green Book’ speaks of an ‘optimism bias’: …’ the demonstrated systematic tendency for appraisers to be over-optimistic about key project parameters’ .


• Potentially large cultural, educational and inspirational impacts, from space exploration in particular

• Contributions to other areas of considerable importance to society such as defence and climate change.

2.8.2 Implications for evaluation methodologies

The above discussion suggests that there is a strong case for directing more attention (especially if resources for assessment are limited) to impact areas where the space sector has different characteristics from other sectors, and where these differences are expected to lead to substantially different levels of impact. In the following section we discuss the implications of this for the prioritisation of methodological benefits, with reference to additionality issues where appropriate.

Each of our identified impact categories is covered in turn, with a summary of its perceived prioritisation in terms of methodological development, with reference to assessment of additionality associated with public space investments.

2.8.3 First tier 1 economic impacts

To the extent that, as previously noted, tier 1 (direct, indirect and induced) economic impacts apply to any area of public expenditure, there is nothing special about space. However, survey evidence on which the measurement of direct impact is based also serves to define the scale and boundaries of the sector, and as such is important in the specification of the entity whose benefits the overall exercise is designed to assess. This is particularly pertinent in the case of the downstream sector, which is a relatively small recipient of public funding; however, much of its value-added is derived from exploitation of data produced by publicly-funded activity the upstream sector, which is here treated as a specific category of the direct impact. Clear specification of the upstream and downstream sectors and the assessment of direct impact are conceptually very similar.

Investments by space agencies contribute to value-added by the space sector (direct impacts) and to their purchases from other sectors (indirect impacts). This provides another potential route for the estimation of the combined direct and indirect impacts, excluding the contributions from downstream sectors derived from their applications using upstream derived data.

Induced impacts of public investments may not be very different for the space sector than for any other. While it may be the case that, with disproportionately high incomes, space-sector employees have different propensities to consume and different spending patterns to consumers overall, the impact of such differences are likely to be small, and to be exceeded by the large uncertainties inherent in estimates of induced impacts generally.

The conclusions from this are:

• It is important that the ‘space sector’ be delineated more precisely than is currently possible, via improved surveys of upstream and downstream companies, and including other sector participants

• Defining the downstream sector as users of upstream-generated data, surveys should be used to quantify the extent of their dependence on such data

• Improved estimates of indirect and induced impacts are a lower priority, although attempts to reconcile agency investment data with information from space-sector recipients would provide a valuable means of increasing confidence in definitions of sector boundaries

• The impacts on both upstream and downstream sectors of a cessation of public investments should be explored, with particular emphasis on the availability and relative costs of alternative sources of funding and/or data, to provide evidence for the additionality associated with Tier 1 economic impacts


2.8.4 Second tier economic impacts

The presence of Tier 2 economic impacts – knowledge and market spillovers – are a major justification for public sector sponsorship for private sector R&D. Broadly, public investment in space is for procurement or for R&D, the latter forming a relatively large component, and the former generally requiring at least a degree of development work. Tier 2 impacts, particularly knowledge spillovers, are thus likely to provide a high degree of additionality for space investments.

Knowledge Spillovers The high R&D intensity of the space sector suggests that knowledge spillovers are of particular importance to it. This is reinforced by the high skill intensity of the sector, which gives staff the opportunity to develop their skills in ways likely to prove effective in other applications.

Market Spillovers Market spillovers from space have been subject to relatively little attention in the past, so their importance for the sector is somewhat unclear, although the widespread market penetration of consumer devices based on downstream value-added services, in particular, suggests that consumer surpluses may be considerable.

Market spillovers are benefits accruing to producers – and, much more significantly in the long run, consumers – who benefit in ‘unearned’ ways from technological advances. Producers may find they can (in the short term) sell a product or service for more than they would be prepared to accept (producer surplus, which competitive pressures tend to erode away), while consumers may be prepared to buy at a price higher than that offered (consumer surplus). Computers provide an often-quoted example – over the last two or three decades, huge improvements in performance have been accompanied by dramatic price reductions, prices in many cases being well below those that many consumers would be ‘willing to pay’. The importance of taking account of consumer surplus is that such price reductions lead to a reduction in per-unit ‘Tier 1’ benefits (direct, indirect and induced impacts on GDP), while consumer welfare has clearly increased.

As indicated above, market spillovers in the space sector can arise from downstream consumer products and services performing novel functions, or functions previously obtainable at lower quality and/or higher cost (e.g. satellite-navigation devices superseding maps). Another possible source is from spinoffs initially stimulated by knowledge spillovers, where a new product or service initially dependent on space technology but applied in a non-space area offers an improved and/or cheaper alternative to existing products or services.

2.8.5 Environmental and social impacts

Space, particularly Earth observation, from space, has long contributed to our understanding of the planet and its physical, chemical and biochemical mechanisms and processes. Starting as a scientific tool, the ability to measure the earth’s parameters has increasing become an important tool for monitoring the Earth and its environment for both scientific and regulatory purposes. Therefore the role of space is viewed as particularly important for environmental impacts. However environmental impacts are the result of multiple inputs of which space is just one – the actions of politicians and policy-makers in developing environmental legislation and/or regulation or example, and the use of Earth-based measurement systems to monitor environmental parameters. Therefore it is important to determine the additionality of the space investment – i.e. the relative scale and importance of the space contribution to the overall impact.

Similarly while social impacts are regarded as highly important by space agencies, many of these impacts are the result of multiple causes and the role played by space inputs needs to be fully understood to enable an accurate assessment of the extent of impact attributable to public space investments.


ECONOMIC IMPACTS

3. Introduction

3.1 Definitions

The definition of economic impacts and indicators to assess them is a well-developed field of study and standard definitions are used here. These include the first tier impact categories common to all economic activity (direct, indirect, induced) and the second tier impacts associated with investments in R&D and technology development (market and knowledge spillovers). The definitions are set out in Figure 9.

Figure 9 Definition of economic impact categories

Description Indicator(s)

Direct economic impact

An immediate financial impact that results from the public sector purchasing goods and services from economic actors in order to develop and operate space-related functions. Also included are income flows generated in downstream space sectors directly dependent on data generated from publicly-financed upstream initiatives. A direct impact will also be generated by the expenditure on space administration.

These impacts are essentially reducible to the flows of income and direct employment (wages) and profits they support.



Indirect economic impact

A financial impact that results from the public sector making purchases in the space sector, wherein space companies make contingent investments and purchases from their supply-chain in order to meet the their public sector orders. This supports additional jobs and profits in the supply-chain.

This impact will also be generated by the downstream sectors as space infrastructure is utilised for further economic activity.



Induced economic impact

A financial benefit that results from the spending by individuals in receipt of wages / salaries from employment generated by the public sector making purchases in the space sector, whether this be from wages paid directly by the space sector, or from wages paid by their suppliers as a result of orders made by the space sector. Various areas of the economy are thereby stimulated through income (or ‘Keynesian’) multipliers.

This impact will also be generated as a result of the spending of those employed in the downstream sectors.



Knowledge spillovers

This impact arises where the advances in scientific and technical understanding developed in the space sector diffuse into wider society and cross-fertilise with other intellectual endeavour and support the emergence of otherwise impossible innovations in many and various unexpected locations.


Market spillovers: Producer & Consumer surplus

These impacts arise from ‘leakage’ of benefits through the operation of market forces, which tend to cause some of the benefits from a new product or process to accrue to buyers. Competitive pressures mean that prices do not fully reflect the ‘willingness to pay’ of purchasers. This can produce consumer or producer surplus, the former representing benefits accruing to the buyer, the latter to the seller.

Thus consumer surplus is the difference between the price that the consumer is willing to pay and the actual price paid and producer surplus is the difference between the price at which a product is sold and the lowest price at which the producer is prepared to sell.



3.2 Overview of methodologies recommended

The methodologies proposed for the direct, indirect and induced impacts are based on standard economic approaches and tailored for the space context. The extent of ‘customisation’ required is variable as are the possibilities to make improvements resulting in different levels of alignment with, and therefore robustness for, the space context. Methods to assess market and knowledge spillovers in their entirety are less well-developed, nevertheless methodologies do exist and we present recommendations based on previously utilised methods and some newer more experimental approaches.

The chapters that follow address each economic impact in turn, presenting a discussion of the existing methods and available data and the extent to which customisation, improvements or new approaches are required. A number of options are presented for each impact category and a recommendation made as to the preferred methodology. A ‘fallback’ methodology is also presented that describes what could be achieved if no, or at least very limited, additional resource is available. The recommended and fallback methodologies are summarised in Figure 10.

Figure 10 Recommended methodologies: economic impacts

Impact category Recommended methodology Fallback

Direct economic impact

Extensions of current surveys to include:

• Universities, public research institutes and internal Agency activities

• Sampling of downstream sector actors, including details of information sources and consequences for business of non-availability of space data to better define the downstream sector

• Use of Euroconsult data on support provided by public funding agencies

• Reconciliation of data on funding with that on recipients’ sales

Estimates based on data from current surveys of European industry

Indirect economic impact

Creation of input-output coefficients for a bespoke space sector, based on existing data supplemented by extension of current surveys to include information on volumes and sources of supplies into the space industry.

Use of existing estimates of indirect effects, using standardised factors (‘multipliers’) applied to direct impacts

Induced economic impact

Extension/adaptation of current macromodels, to incorporate a bespoke space sector (consistent with suggested developments on indirect impact).

Use of ‘rules of thumb’ or ‘stylised facts’ based on averages or ranges of values derived from available macroeconomic models

Knowledge spillovers

• Improved identification of cases of spillovers and data collection on benefits

• Case studies of known examples, with estimation of gross and net (inclusive of opportunity costs) benefits

• Use of OECD space patenting information to (a) highlight particular spillovers for investigation and (b) enable citation analysis for levels and trends in cross-fertilisation between space and other sectors

Use of existing estimates of the importance of knowledge spillovers, assuming the space sector to be typical (in terms of spillovers) of sectors where such studies have been carried out. This involves identification and use of ‘stylised facts’ or ‘rules of thumb’ as multipliers, e.g. one notable spillover worth €Xm expected per €Ym of expenditure


Impact category Recommended methodology Fallback

Market spillovers: Producer & Consumer surplus



• Ongoing inclusion of assessment of consumer and producer surpluses from new developments as they occur, as a routine component of evaluation and monitoring of the impacts of public investments in space

Use of the currently available estimates of costs and benefits, including profits and price-reduction opportunities and quality improvements, of existing or planned initiatives where major studies have already been carried out, such as for GMES and Galileo

4. Direct Economic Impacts

4.1 Introduction

This chapter outlines a method for estimating the direct economic impact of public investments in space, by which we mean the income and employment generated immediately in the space economy – consisting of the upstream component and the downstream sector providing goods and services dependent on it - by the public sector purchasing goods and services in order to develop and operate space-related functions. This is important not only in contributing to an assessment of the impact of the sector, but also as a means of improving the definition of the sector and aiding establishment of a consensus regarding its boundaries.

In simple terms, public investment of €1m should produce €1m of direct economic activity, possibly reduced to cover the administrative cost of allocating the investment. There may also be some small loss of direct benefits to Europe resulting from imports through contracts or sub-contracts being placed with actors located outside Europe.

In practice, each €1m of public sector expenditure on space goods and services will require subsidiary purchases within the sector (e.g. intra-sectoral subcontracts) and from the wider economy, whether that is raw materials or business services. Therefore, the direct value added generated in the European space economy by European governmental space expenditure will be somewhat less than 100% of that expenditure figure, possibly in the range 50-80%, with the balance used to buy more general goods and services from elsewhere in the economy or the rest of the world.

4.2 Approach and Methodology

The basic information required for estimating the direct economic impact of public investments in space is the activity generated by those investments, as measured, for example, by turnover, value added or employment. Value-added is the preferred output measure; it reflects the contribution of the sector to GDP, essentially equal to the value of sales (or turnover) minus the value of inputs from other sectors. Turnover includes the value of goods and services bought in by the space sector from elsewhere in the economy (or overseas), which we consider separately under indirect impacts.

For reasons given above – specifically imports and administration costs – public expenditure on space goods and services is not an accurate measure of direct economic impacts. An alternative approach is by means of surveys of activity of actors in the space sector. Ideally, the overall approach would include a process of reconciliation between data obtained from funding sources and surveys of funding recipients, to give


confidence in the veracity of the estimates and improve understanding of the way in which funds are distributed.

4.3 Data collection

The space economy is a rather broad concept, including as it does a range of diverse but easily identified types of contractor (such as satellite manufacturers) and also, for example, in-house technologists working for a national space agency. A substantial fraction of total public investment in space is spent through in-house laboratories and institutions as well as with various external public or not-for-profit organisations (such as universities). These are not companies in the conventional sense, but they do employ thousands of people producing goods and services in response to public agencies’ commissions. Our definitional ‘net’ needs to be cast wider still, to include public ‘space’ contracts being placed with satellite operators, financial services businesses and even downstream service providers.

The space economy does not align well with standard industrial classification systems. For example, the UN’s International Standard Industrial Classification codes incorporate spacecraft manufacturing with that of aircraft (ISIC 303) and launchers with freight and passenger transport (ISIC 511/512). Because of this, bespoke surveys tend to be more useful sources of information.

Data collection is discussed under three headings – surveys of the upstream sector, surveys of the downstream sector, and information gathering from funding sources.

4.3.1 Surveying the upstream space sector

Two international surveys stand out as the most relevant sources of data for the upstream space industry, ESA’s own European Space Industry Survey3 and ASD-Eurospace’s annual Facts and Figures report. Both surveys work with a directory of 200 or so known space businesses.

They do not include the downstream sector, nor do they include all ground segment and equipment manufacturers. Moreover, the focus on industry means they have less good coverage of public research organisations.

The ESA European Space Industry Survey is carried out every three or four years. Its scope is the ‘upstream space infrastructure industry, i.e. suppliers present in the launch vehicle, satellite and associated ground segment domains. The associated ground segment includes activities that support satellite and launcher operations.’ The focus is limited to the upstream sector on the grounds that ESA’s influence in the downstream market is ‘more limited’.

Data collected, which is of particular relevance to the present study include:

• Company space sales and staffing, with breakdowns by market and activity

• Values of inputs procured, broken down into corresponding detail

The ASD-Eurospace Facts and Figures report is published annually. Its key focus is also on detailed information on sales and employment. The survey is not limited to Eurospace members.

The 2011 ASD-Eurospace report estimates net sales for the European space industry at around €6.1 billion for 2010 (and employment at 35,000 full-time equivalents). This figure includes an estimate of €3.2 billion for sales to European public customers. The balance is made up by sales to private customers in Europe and private and public customers in the rest of the world.

3 Bertin Technologies/Euroconsult for ESA (2009), ‘European Space Industry Survey 2003-2007’


4.3.2 Surveys of the downstream industry

Official statistics are useful insofar as they capture key information such as GVA and employment levels by industrial sector. As we have already discussed, because of the diversity of the downstream space sector, there is no single industrial classification that covers the entire sector. However, out of the three downstream value-chains, satellite communications, satellite navigation and earth observation, the former does have its own industrial classification ‘Satellite telecommunications activities (ISIC class: 6130),’ which could be useful when estimating its direct impacts. The other two do not and are disbursed untidily across several different classifications, including:

• Manufacture of communication equipment (ISIC class: 2630)

• Manufacture of instruments and appliances for measuring, testing and navigation (ISIC class: 2651)

• Data processing, hosting and related activities (ISIC class: 6311)

• Other research and experimental development on natural sciences and engineering (ISIC class: 7219)

• Other parts of the space sector are ‘buried’ in other classifications4

A one-off study carried out by the Paris-based consultancy Euroconsult, commissioned by ESA, provides the most comprehensive look to date at the European downstream space sector.5 This survey provides a ‘mapping’ of the downstream space sector into the three main value chains – satellite communications, satellite navigation and earth observation. These are further divided into a total of 16 ‘macro segments’, such as transport, consumer broadband and land monitoring, which are in turn further divided into ‘market segments’ for services, addressing customers with specific global, regional and local requirements.6

An important but difficult issue concerns definition of the boundaries of the downstream sector. Downstream satellite communication companies include those that transmit or broadcast information over satellites and those that manufacture the receivers this requires, including satellite television broadcasters and broadband services for remote areas. In the case of satellite navigation, a company producing GPS receivers clearly manufactures a space-enabled product and is part of the downstream sector, while users of such receivers are not. Overall, the downstream sector should only comprise enterprises that make use of information from upstream satellite technology by directly receiving and adding value to it.

The outer boundary of the downstream sector is notoriously rather fuzzy. ‘Grey’ areas include, for example, mobile devices that incorporate applications dependent on data provided by satellites but which are not entirely dependent on satellite-derived data. Providers of such devices are best considered as users of space-sector outputs rather than as themselves part of the space sector.

The US-based Satellite Industry Association (SIA) publishes an annual global survey7 which, however, does not report European activity separately and does not explore governmental sales among satellite services companies. There have also been several

4 International Standard Industrial Classification of All Economic Activities, Rev.4, United Nations 55 EUROCONSULT (2007) Assessment of the Downstream Value-Adding Sectors of Space-Based

Applications: Final Report, for the European Space Agency, Paris 6 ESA, Euroconsult, ibid., p. 9 7 The State of the Satellite Industry Report (June 2011) was prepared by Futron for the SIA. It includes an

estimate for worldwide satellite-services’ sales overall (US$ 100 billion in 2010) and by broad segments. Its time-series data show revenues doubling in the period 2005-2010, driven to a very great degree by satellite television and market expansion in Asia.


studies at member state level; however these have been one-offs and are clearly not sufficient in terms of their geographical scope.

4.3.3 Public sector ‘funders’ enquiry

Euroconsult carries out an annual governmental survey covering all the data necessary for this exercise. Its makes these data available through its report, ‘Profiles of Government Space Programs.’

The report provides time-series data and analyses of government expenditure on space for agencies in 60 countries. The report, and associated spreadsheets, provides various data charts and analyses relevant to the assessment methodology, including but not limited to:

• Annual and time-series governmental expenditure by country and by agency

• Annual and time-series governmental expenditure by country, civil and military

• Annual and time-series governmental expenditure by country and application

4.4 Analysis

Ideally, analysis of the data requires that it be manipulated, as necessary, into a form that allows:

• Unambiguous specification of the boundaries of the upstream and downstream segments of the space sector

• Within each, estimates of value added, additionality and employment, perhaps disaggregated according to activity-based and/or market-based sub-segments

• Estimates of the value of inputs to each segment from other industries

4.4.1 Specification of boundaries

Specification of the upstream sector is relatively straightforward. The downstream sector may best be defined in terms of survey questions by their degree of dependence on the upstream sector, and the effect on their business in the hypothetical event of satellite-based information becoming unavailable.

Subsidiary purchases made within the space economy – which are covered in the ASD-Eurospace survey – might best be treated as part of the total direct economic benefits, using a working assumption that the mix of contracts and sub-contracts will be similar in all markets including sales to the public sector. The analysis would use the aggregate proportion of intra-sectoral purchases for sales to the public sector.

All space companies are likely to be purchasing goods and services from other economic sectors, from chemicals to financial services. These are excluded from direct economic benefits: for this reason we need to estimate value added rather than turnover. We define these secondary purchases as indirect economic benefits, and address their estimation in a separate chapter.

4.4.2 Value-added and additionality

As indicated above, survey data on industry activity tends to report output values in terms of sales rather than value added – the latter measure is more useful in representing the contribution of the sector to GDP. Sales data can be converted to value-added by subtracting off the values of inputs – such data are available in the ESA upstream survey – or by applying some generic revenue-to-value-added conversion factor to the sales figures.

Additionality – the extent to which public support to industry creates ‘additional’ activity, or (at least to some extent) merely forms an alternative source of funding for work that would be done anyway – is an important issue in evaluating support for industrial R&D in particular. However, given that much public investment in space is


purchasing components of new space infrastructure, it seems unlikely there will be much risk of public funds substituting for or crowding out private investment. Publicly supported space activity may displace private activity at the margins, however particularly where European or national institutions are investing in capability building within firms or co-finance the piloting and demonstration of new satellite systems and services. Overall, we would expect public investment in the upstream sector to be highly additional.

The question of additionality is likely to be a more significant issue for the downstream sector, and needs to be addressed in any survey of that sector.

4.5 Scope

The scope of the data required for direct impacts in terms of sectoral coverage are the upstream and downstream sectors as discussed above, adjusted (as the ASD-Eurospace survey does) for intra-sectoral trading, and covering in-house space agency activity, universities and public research institutes as well as companies. The ‘downstream’ survey would be designed to build on the space industry survey, sampling organisations in each of the key market segments that are not covered: operators, ground segment, value-added services. Geographically, data is required covering all ESA member states.

On the funding side, expenditures by ESA, national space agencies and other public bodies are required. The Euroconsult survey is comprehensive and covers the full extent of public investments of relevance to the proposed assessment methodology. It does not include data about the destination of those investments, and the extent to which a given public body’s expenditure is spent with its in-house space agencies or externally and where it is external whether it is within Europe or the rest of the world.

4.6 Implementation

Possible data sources for implementation are reviewed below.

4.6.1 The upstream sector

Given that two established surveys of the upstream sector - the ESA and ASD-Eurospace surveys – already exist, the most obvious course is to build upon these. Although not undertaken annually, the ESA survey, currently being carried out, is the obvious choice as a starting point, being under the direct control of ESA itself.

For completeness, a module of the new survey could be directed to universities and public research institutes.

4.6.2 The downstream sector

Surveying the downstream sector can serve a number of purposes:

• To determine the extent of the sector’s receipts of public funding for space

• To assess its dependence on the upstream sector, which in turn would help to delineate the boundaries of the downstream sector

• To help identify spinoffs from space activity

The 2007 ESA-Euroconsult survey of the downstream sector involved interviews with around 50 downstream organisations (respondents from a longer list of named service providers, equipment suppliers and R&D organisations), spanning the satcoms, satnav and earth observation markets. The 2007 exercise could be repeated, re-using the market segmentation and database, but tying the questions to the needs of the assessment methodology: direct sales to governmental space programmes and sales and employment more generally. While there will have been a lot of changes within that list of named individuals and organisations in the intervening five years, the segmentation and database is a good starting point for a new survey. A little further


work and judgement to expand and rebalance the survey population would be appropriate.

The extent to which the downstream sector is the direct recipient of government expenditure on space, and therefore how important it is for the assessment methodology, is unclear. However, even were we to discover (after the first iteration) that the direct economic benefits were not sufficiently large to warrant the creation of a new periodical survey, the size and dynamic nature of these space-dependent economic sectors is a hugely significant indirect benefit of governmental expenditure on space. A new survey – probably larger and more robust than we would need for sizing the direct economic benefits – would be justified.

The fall-back position would be to use the estimates for governmental income for value-added services companies in each of the key market segments, which ranged between 0-3% and were estimated at €0.5 billion within a total of €22 billion (2005).

4.6.3 Public sector ‘funders’ enquiry

‘Profiles of Government Space Programs’ is a comprehensive report published annually, with no obvious important missing data components. As such, it provides a good source of expenditure data to feed into the proposed assessment methodology.

There is one practical problem however, which concerns the terms of access to the data and the possibility of its re-use within the assessment methodology.

Profiles of Government Space Programs is a charged publication, with a price in 2012 of around €5,000 for a single hard copy of the report and a ‘soft’ copy of the underlying data. That fee permits a single team within a single organisation to use the report and data for its own purposes, and the terms and conditions of sale prohibit wider dissemination or use. ESA does of course purchase copies of the report.

The annual survey and report is a very valuable commercial asset. However, Euroconsult has indicated its willingness to explore the terms on which it might be able to permit ESA to re-use a sub-set of the survey data in the proposed assessment methodology. This discussion should also include the requirements for gaining permission to publish selected key metrics within the assessment report.

If acceptable terms for the re-use and selected publication of Euroconsult data cannot be agreed, then the fall-back position is to use either the European Space Directory’s annual estimate of institutional sales or the Eurostat GBAORD statistics on space R&D. The former misses some key programmes (e.g. the EU RTD Framework Programme), while the latter only includes civil expenditure on applied research and technology (e.g. military satellite expenditure is classified to the defence category not space and EUMETSAT would be missing altogether).

ESA could choose to replicate certain aspects of the Euroconsult survey within the EU, as public funders are clearly able to furnish third parties with relevant and comparable statistics. That would enable ESA to refine its survey over the first two or three iterations, to acquire exactly the right statistics to plug certain gaps in expenditure / revenue data and to strengthen the verification process. On the downside, such an exercise might easily cost €250,000 for each iteration, more in the first year, and would be something of a challenge or distortion to the current situation where the market is providing those data on a pay-by-use basis. On balance, this course of action seems unwarranted at this point in time.

4.7 Methodology Options

Status quo

Use of currently available secondary data, i.e.:

• ESA ‘European Space Industry Survey 2003-2007’, currently being updated, and the ASD-Eurospace annual ‘Facts and Figures’ report


• ESA/Euroconsult assessment of the downstream value-adding sectors

• European Space Directory data on sales and Eurostat data on space R&D

This option would mean that important gaps in current surveys – particularly government intramural spend, direct support for operators and downstream sectors, universities and imports would be omitted.

Moderate additional effort (200 person days per annum)


• Universities, public research institutes and internal Agency activities

• Sampling of downstream sector actors, including details of information sources and consequences for business of non-availability of space data to better define the downstream sector

• Use of Euroconsult data on support provided by public funding agencies

• Reconciliation of data on funding with that on recipients’ sales

This is the recommended option

Major additional effort (500 person days annually)

• Creation of a set of new surveys to the upstream and downstream sectors

• Creation of new surveys of space agencies to identify all public funding of space activities

This option is not recommended as it would unnecessarily duplicate much existing work and would be relatively expensive. Response rates from recipients of public funding are also likely to be poor given likely resistance by industry in particular to an additional survey. However the survey of space agencies might be necessary if the data on public funding from private sources (e.g. Euroconsult) is found to be incomplete or if there are issues with publishing data from this source in the wider public domain.

5. Indirect economic impacts

5.1 Introduction

Following a widely-used convention8, we define indirect impacts as the contributions to national value added and employment contributed by sectors supplying the space industry as a result of public investments in that industry. Also to be included are the suppliers to the industries supplying the space sector, giving a set of (in principle infinite) impacts along the supply chain.

The supplying industries are not themselves part of the space sector but are dependent on it; in the short-term their contribution is dependent on the demand for space-sector outputs, but in the longer run they may be able to respond to a reduction in the demands of the space sector (or to its disappearance) by expanding their customer base and/or diversifying their activities, or alternatively their human and capital resources may find application elsewhere.

8 E.g. Oxford Economics, ‘Size and Health of the UK Space Industry’, 2010



In principle, the methodology involves straightforward compilation of data on the values of inputs to the space sector from each of its supplying industries, inputs to these industries from each of their suppliers, and so on up the supply chain9.

Such data (albeit not necessarily in the required form or level of disaggregation) are available in input-output tables that model interactions between sectors, goods and services – that is, they model who is selling what to whom. The tables come in various guises and the following brief description uses European System of Accounts (also abbreviated as ESA) definitions and terminology.

The basic components are ‘supply’ and ‘use’ tables, which show the supply of goods and services within the economy. Rows are labelled by products, in accordance with the CPA (“Classification of Products by Activity’) and columns by NACE categories. CPA and NACE are fully aligned, the CPA showing the principal products of the industries according to the NACE. The supply table shows the pattern of production; the use table, the structure of demand.

From the supply and use tables, ‘symmetric’ input-output tables (with both rows and columns labelled by products or with both labelled by industries) are derived. These are the primary tables used for input-output analysis. Essentially, the number in the cell in the ith row and jth column of the industry-industry matrix (say A) shows the demands of industry j for the outputs of industry i, i.e. the value of the flow of goods and services from industry i into industry j in the year to which the table refers.

These inter-industry flows represent ‘intermediate demand’ (of one industry for the products of another). ‘Final demand’ is the (vector) of consumption by households (and Government) for the products of each of the industries classified. The total demand for an industry’s products is the sum of these two – for example, some output from agriculture forms an intermediate input to the food processing industry, some is purchased directly by consumers as final demand.

It is possible to ‘tag on’ various additional rows to cover issues such as intermediate sectoral and final demands for various forms of primary and secondary energy, and emissions of various kinds. These issues are quantified in terms of quantities rather than financial values.

5.3 Data collection

As pointed out in the discussion of direct benefits, space activities do not have a specific category in economic classification systems. As well as precluding precise delineation of the space sector, this imprecision also necessarily affects indirect (and induced) benefits – over- or underestimates of the size of the space sector will lead to corresponding biases in estimates of these benefits.

Among the Standard Industrial Classification codes as used in input-output tables, that with the most clearly indicated space component is 35.30 (manufacture of aircraft and spacecraft). Others, which include space products and services (upstream and downstream) include (e.g. Hertzfeld 2002):

• Transport equipment (includes space launchers)

• Radio and TV equipment (includes communication satellites)

• Optical instruments (includes remote sensing cameras)

• Navigational equipment (includes GPS receivers)

• Broadcasting and telecommunications (includes satellite communications)

9 This applies if the value of each ‘input’ is measured as value-added; if measured as total cost, double –counting can ensue.


A common approach is to estimate the proportion of such categories that can be ascribed to space, and assume that the inputs used by the space part of them are in the same proportion to the total, thereby introducing two potential sources of error. In some studies, a survey of space companies includes requests for non-space inputs, improving the accuracy of estimates of indirect effects.10

Key sources of internationally comparable input-output data are OECD and Eurostat.

5.3.1 OECD data

The latest set of OECD input-output tables covers 44 countries with data for years around 2005, with standardised 37-sector coverage based on ISIC Rev. 3. This represents a contraction from the 48-industry breakdown used in the 2006 edition of the OECD I-O database, which split ISIC code 35 ‘other transport equipment’ into three sub-categories, one of which was ISIC 353 ‘aircraft and spacecraft’. In addition, the current service category ‘transport and storage’ (ISICs 60-63) formerly identified ISIC 62 ‘air transport’ separately. This means that the current industry breakdown may be too aggregated for the sectors identified for use as proxies for space.

Issues connected with the extension of the existing OECD input-output framework to incorporate explicit representation of the space sector are discussed in section 5.6.

5.3.2 Eurostat data

Eurostat has published a 600-page manual describing methodologies and procedures for the compilation of supply, use and input-output tables in the European Union, to assist in member states in compiling the tables, foster quality and stimulate harmonisation.

The European System of Accounts (ESA) classifies industries according to the ‘General Industrial Classification of Economic Activities within the European Communities’ (NACE)11 and products according to the ‘Classification of Products by Activity’ (CPA). The ESA Regulation currently requires the application of the main classifications with 60 products and 60 industries.12

Most EU member States have submitted symmetric input-output tables (SIOTs) to Eurostat, although only supply and use tables are currently available for some. These submissions have been used by the Institute for Prospective Technological Studies (IPTS) of the JRC to construct a preliminary product-by-product EU-27 SIOT for the year 2000. The aggregate EU27 and the 27 individual Member States tables follow the Eurostat manual guidelines, having 60 NACE A60 sectors and 60 types of products (CPA Level 2).13

5.4 Analysis

Input-output analysis can be seen as being developed in a number of sequential stages:

(i) Input-Output coefficients

By dividing entries in the cells in a particular column by that column total gives the share of the total output contributed by inputs from each of the row industries and by the components of value added. These shares form the matrix of input coefficients which sum to unity for each column. Similarly, dividing each row entry by the

10 Such information was requested, for example, in the 2010 survey reported by the UK Space Agency, ‘The Size and Health of the UK Space Industry’, which estimated value-added multipliers of 1.91 and 3.34, respectively.

11 NACE Rev 1.1 is consistent with ISIC Rev 3.1, but somewhat more disaggregated. 12 Eurostat Manual of Supply, Use and Input-Output Tables, 2008 Edition, p. 30 13 Rueda-Cantuche et al. (2009), ‘A Symmetric Input-Output Table for EU27: Latest Progress’


corresponding row total shows the shares of total output of the row industry going to each (intermediate and final) destination. This yields the matrix of output coefficients, in which the rows sum to unity.

(ii) Leontief inverse

By definition, the total output Q of an industry is the sum of the flows of its outputs into all industries in the economy (including itself) plus the final demand F for its products. Thus for industry 1

Q1 = a11 Q1 + a12 Q2 + a13 Q3 + …+ F1

where for example a12 is (value of intermediate flow from sector 1 to sector 2) / (total output of sector 2). Thus the a1j’s are the shares (proportions) of sector j’s output contributed by sector i., i.e. the input coefficients for the domestic intermediate. Generalising

Qi = ΣjAij Qj + F i

And in matrix terms the Leontief inverse follows as (1-A)-1 in the equation Q=(1-A)-1F, which reflects the direct and indirect requirements of intermediates14.

(iii) Multipliers

The output multiplier pertinent to a given industry is the column sum of the coefficients in the Leontief inverse. This indicates the increase in the sum of direct and indirect effects of a unit increase in final demand for industry output.

5.5 Scope

The scope of expected results from an analysis of indirect impacts could be:

• Impacts of the overall international (European or wider) space activities, however funded. Such studies would require international-level data (with input-output coefficients etc. consistent across countries)

• International impacts resulting from specifically publicly funded activities

• Impacts of space activities (total or publicly-funded) on specific national economies. Use of national input-output models

• Impacts of particular public space investments, e.g. projects or programmes

5.6 Implementation

There appears to be a case for more systematic identification of inputs and outputs from the space sector by means of a more systematic treatment of current aggregated input-output categories, with the establishment of ‘rules of thumb’ for its definition in terms of proportions of other sectors which could be generally accepted.

A more radical option is the creation of an additional space sector row and column from newly acquired primary data, which would probably not require any amendment to the data for the sectors that currently incorporate space activity, since space represents only a very small proportion of them. The new primary data would involve collection of additional information on the sources of inputs to the space industry, and the destinations of outputs from it. The sectoral classification under which such data would be collected would depend on the sectoral breakdown used in the input-output structure within which the separately specified space sector was to be incorporated.

14 (1-A)-1 = I+A+A2 +A3+…, where A gives the direct requirements of producers and A2 onwards give indirect requirements for intermediates at previous stages of production.


One option is to split the space contributions to ISIC 35, to give a separate ‘spacecraft’ category, and to separate out the space components in ISICS 60-63. A further category ‘other space’ incorporating inputs and outputs not included in the above could also be included. This would yield 40x40 input-output system for specific analysis of the indirect impacts of the space components.

The data requirements for such an extension are seen to be as follows:

• Survey evidence (involving upstream European space companies) of the total value of inputs to the space-related activities of firms receiving public space investments, which in turn is a necessary component for deriving estimates of value-added, discussed in the section on direct benefits

• Estimates by survey respondents of the approximate percentage split of these inputs between industrial sectors, based on the 40-sector disaggregation described above. It is likely that only around 5-8 sectors would make significant inputs to the space industry, so that this is unlikely to be an onerous task

• Estimates by survey respondents of the value of sales of their outputs to downstream space (value-added) service providers, categorised by the sectors in which such providers operate. Such information should allow a realistic extension to the 40x40 input-output system envisaged above

From this, a matrix of input coefficients could be derived by dividing each entry by the output of the sector labelling the corresponding column, yielding the so-called ‘Leontief matrix’.

Inversion of this matrix, producing the ‘Leontief Inverse’, then generates a set of output multipliers which indicate the sum of indirect impacts on the various industrial sectors, the newly-defined space-related sectors being of interest in the present context.

The methodology seems to be viable – a hypothetical input-output system with an additional space sector was explored in Appendix G of Technical Note 1.

However, the credibility of the methodology depends on the practicality of assembling the required additional data, which is likely to be costly. It has also been pointed out to us that significant ‘noise’ is likely to be associated with an attempt to specify a small sector within a large framework; sensitivity to activities of a few major players is likely to lead to instability in the input-output framework. Application of this approach at a regional level, for regions where space constitutes a relatively high proportion of overall economic activity, would reduce this problem, although regional perspectives are not a major focus of the current study. Overall, then a large investment in improving estimates of indirect effects does not at present seem justified.


Status quo


Low-level additional effort (40 person days): • In-depth investigation of the component of space input ‘typically’ contained in

more aggregate input-output categories, to allow improved estimates of indirect impacts

This is the recommended option.


Moderate additional effort (100 person days):

• Survey of firms similar to that of existing European surveys (or extension of existing surveys) for data on volumes and sources of inputs for the space sector specifically

More major additional effort (200 person days): • Additional surveying of firms as above, with a view to creating input-output

coefficients for a bespoke space sector, based on existing data supplemented by extension of current surveys to include information on volumes and sources of supplies into the space industry

6. Induced economic impacts

6.1 Introduction

Induced impacts are those which result from the spending by employees in the space industry (and its supplying industries) of income derived from public investments in space. Various areas of the economy are thereby stimulated through income (or ‘Keynesian’) multipliers. This impact will also be generated as a result of the spending of those employed in the downstream sectors.

6.2 Approach and Methodology – macroeconomic models

Since spending of earned income in space and its supplier sectors is likely to cross a wide range of economic areas and overall impacts are likely to be complex and involve various feedback processes, the usual methodological approach is to make use of a large-scale macroeconomic model of the economic area involved.

Quantitative macroeconomic models are used to describe relationships between economic variables of a nation or region, specifying static ‘snapshot’ scenarios or the dynamic evolution of the economy. They may comprise single relationships (such as Solow’s growth model in the 1950s), or large numbers of interrelated equations describing relationships between many economic factors (including output, employment, trade, prices and many others, often covering several economic sectors individually. The latter offer the opportunity to capture complex feedback mechanisms likely to exist in real economies, at the expense of considerable complexity with a tendency for ‘black box’ – type attributes, whereby mechanisms producing model outputs may be difficult to trace.

In the context of assessing economic impacts of public investments in space, macroeconomic models present (at least in principle) a means of expressing the ‘whole picture’, compared with methodologies of more limited scope which (with the possible exception of cost-benefit analysis) would necessarily give a more partial description.

Up to the 1970s, macroeconomic models generally provided dynamic descriptions of economic evolution based on large numbers of econometrically-estimated equations providing linkages and numbers of feedback mechanisms between the variables, generally demand-driven and with explicit representation of resource underutilisation (predominantly ‘Keynesian’). More recently, particularly following the so-called ‘Lucas critique’15, suggesting that models should be based on more fundamental factors such

15 Lucas, R.E. (1976) Economic Policy Evaluation: A Critique’, Carnegie-Rochester Conference Series on Public Policy 1, pp. 19-46. The Lucas Critique essentially asserts that econometric equations estimated from data using observed relationships between economic variables depend on the policy framework in place at the time, and that they will provide misleading indications of the effects of a new and different policy framework.


as technology and with stronger theoretical foundations. Classes of models have included ‘computable general equilibrium’ models, which may be static or dynamic, and ‘dynamic stochastic general equilibrium models’ with greater emphasis on short-term dynamics. Such models do not necessarily involve full ‘market clearing’ (even in the longer term), but typically have a much stronger neoclassical flavour than their predecessors.

6.3 Data collection

Assuming the use of a macroeconomic model is followed, the data requirements are those of such a model – a wide range of production, employment, trade, price and other financial data, all or most of which is usually obtained from official sources. The advantages and drawbacks associated with the use of existing models, with or without modification, and the possibility of a new ‘space-specific’ model, are discussed later in this section.

6.4 Analysis

The basic theory is fairly simple. By definition, Government (public) spending is one component of national income/GDP, along with consumption and investment. So one unit of public spending immediately increases GDP by one unit, but also increases consumption (and hence GDP) by (say) c units as recipients of the public financing spend their money – c (‘marginal propensity to consume’) is less than 1 since some of the income is assumed to be saved. Purchases from this extra income mean more money in the pockets of product/service providers, who in turn spend a proportion c of this money, and so on ad infinitum. The total long-run effect on national income of an increase ΔG in public spending is ΔY= (1+c+c2+c3+…) ΔG = (1/(1-c))ΔG. Since c is usually assumed to be around 0.8 – people spend roughly 80% of their income – this gives a multiplier of around 5, the type of number often given in textbooks.

In practice things aren’t so simple, mainly because of ‘crowding out’ – the additional consumption could ultimately be at least partly at the expense of existing consumption. There are people who argue that the multiplier is less than one – you get less out than you put in – or even negative. Imports are an issue too. If resources (people, machines) are already fully utilised more spending will just mean inflation (Keynes wrote during the great depression, so he was not concerned at all with such matters). So the value of the multiplier is likely to depend strongly on the state of the economy.

Estimates of the size of the multiplier now tend to be derived from large-scale macro-economic models, consisting of hundreds or thousands of econometrically estimated equations linking demand, supply, employment, industrial investment, imports, exports, prices, interest rates… in many industrial sectors (though interestingly, generally, not ‘endogenous’ technical change - NEMESIS16 might be an exception in that respect). Finance ministries in all major industrial countries have them, but tend to ‘interpret’ the results for public consumption. The UK Treasury model is publicly available and is run by the Ernst & Young ITEM (Independent Treasury Economic Model) Club, and there are lots of versions within academic groups. The methodology is generally to send a ‘pulse’ of increased Government spending (or reduced taxation) through the model, and look at the impact on the variables, particularly GDP.

Typically, a ‘pulse’ of additional public expenditure is input to a model, and the induced effects simulated over future time periods. Results are typically dependent on model structures, which can be underpinned by a variety of alternative economic theories, and outcomes can be extremely sensitive to the in-built assumptions,

16 New Economic Model of Evaluation by Sectoral Interdependence and Supply. See ERASME team, ‘The NEMESIS Reference Manual’


including, for example, the extent to which private investments are ‘crowded out’ by the additional public expenditure.

Unfortunately, numerical estimates of the multiplier vary widely, and a scan of recent literature gives no indication that consensus is any nearer than it was 40 years ago (when anti-government-spending Monetarists first started suggesting that public spending was not only useless but counterproductive). Values depend critically on model structure, which depends in turn on the views of the model builders on how the economy works. Estimates of the multiplier are not something that finance ministries routinely make public.

There is some more recent evidence from the US and Europe - in January 2009, a high-powered group from the President’s Office of Economic Advisors (Bernstein-Romer) estimated that a 1% increase in government purchases would result in an increase in 1.6% in real GDP, based partly on results from the US Federal Reserve economic model. The general response seems to have been that even a multiplier of 1.6 is too high – a German group led by Volker Wieland estimate a multiplier between 0.5 and 0.6 for a permanent increase in US government spending from the end of 2010. They explain the difference between their results and those of the ‘Fed’ partly in terms of different assumptions about interest rates and partly their incorporation of expectations.

For Italy, Faggian and Biagi estimate a national multiplier of around 1.6, using methods based on assumed marginal propensities and ‘leakages’ (taxes, imports, savings) rather than an economic model. Using various theory-based models, Kaszab (2011) of Cardiff Business School find multiplier values for the UK consistently under unity using various assumptions – although with fixed interest rates he gets a result close to that of Berstein-Romer in the short run.

Rather than get further embroiled in the morass of detail, uncertainty and ambiguity surrounding this issue, the best strategy seems to be to acknowledge the uncertainty and (perhaps) advocate the use of a particular source model for ESA-based estimates. There seems to be no obvious criterion for arguing that one estimate is ‘better’ than another, but if values provided by any particular model look ‘reasonable’ and can broadly be explained, that seems to be the best bet. Candidate models include national econometric models such as that of the UK Treasury, models used by private academic and consultancy groups such as Oxford Economics (who have already applied their model for this purpose) and NEMESIS.

The issue of the ‘Keynesian’ multiplier is potentially significant and therefore cannot be ignored, and the methodology of sending a ‘shock’ through a macroeconomic model and assessing the impact seems to be the best available. Limitations centre around the theory-dependent uncertainties associated with the estimates, which need to be recognised.

6.5 Scope

The scope of the expected results could be the induced impact of total (or publicly-funded) European space activities, requiring consistent international-level data, or the induced impacts on specific national economies, or (at least in principle) induced impacts at a sub-national regional level. The scope of a study could also relate to particular public space investments, e.g. projects or programmes.

6.6 Implementation

In principle, any macroeconomic model may be used to estimate induced impacts. It is however possible that the pattern of expenditures by space-sector employees – and the structure of their decisions to spend rather than save – may not be typical of employees overall. To this extent, use of a model in which a space sector is separately identified might be expected to provide more reliable results. Estimates of induced impacts, however, are extremely uncertain and more likely to be influenced by the


underlying assumption in the model regarding types and strengths of feedback processes than by particular sectoral representations.

The next level of implementation, requiring some additional effort, involves extension of an existing model to represent the space sector more explicitly. If this route is chosen, the extended model would be expected to be applicable to a wider range of economic impacts (including Tier 2 impacts).

A more radical alternative for the assessment of induced (and other economic) impacts is the construction of a new model, specifically for the purpose of analysing the impacts of public space investments. Features of such a model would include:

• Representation of the European economy, albeit at a fairly high level of aggregation, together with particular representation of the space sector, calibrated according to ‘best’ available data, combined with new primary data assembled specifically for the purpose

• Ability to incorporate results from micro-level and other studies of Tier 1, 2 and 3 impacts of public space investments, in order to provide a comprehensive overview of the benefits of such expenditures

Such a model could provide an accounting framework, acting primarily as a means of combining the benefits of space expenditures in an appropriate way (in particular, avoiding double counting), or could encapsulate a more comprehensive dynamic representation to cover the temporal evolution of space expenditures.


We can identify four levels at which a macroeconomic approach could be applied to induced impacts (and more generally to the space sector). In order of increasing extent of required methodological development, these are:

Status quo • Use of ‘rules of thumb’ or ‘stylised facts’ based on averages or ranges of values

derived from available macroeconomic models

Low-level additional effort (20 person days):

• Use of an un-adapted existing model to simulate impacts of public space-sector investments, using outputs from sectors represented in the model which incorporate elements of the ‘space sector’, on the assumption that this sector is broadly typical of the larger sectors which incorporate it

Moderate additional effort (100 person days):

• Extension/adaptation of current macromodels, to incorporate a bespoke space sector (consistent with suggested developments on indirect impact)


Major additional effort (500 person days):

• Construction of a new custom-made model specifically designed for the assessment of economic impacts of the space sector


7. Knowledge Spillovers

7.1 Introduction

These arise from ‘knowledge created by one agent used by another without compensation, or with compensation less than the value of the knowledge’ (Jaffe 199617)). Benefits from knowledge spillovers occur through the ‘leakage’ of advances in understanding developed by recipients of public investments in the space sector to others (in the space sector or elsewhere) not directly participating in the initial activity.

Knowledge spillovers occur when the advances in scientific and technical understanding diffuse into wider society and cross-fertilise with other intellectual endeavour to support the emergence of otherwise impossible innovations in many and various unexpected locations. A knowledge spillover can be intentionally facilitated by the knowledge generator e.g. in scientific publications or hindered by the use of patents. However patents, while protecting the inventor from direct commercial exploitation of an invention, also require the disclosure of knowledge that may be applied by others in new and different applications. In practice, any commercialised products or services involving new knowledge are potential sources of knowledge spillovers.

As well as covering knowledge embodied in products and services, the term ‘knowledge spillover’ might also be used to include knowledge ‘embodied’ in a researcher moving from one employer to another, the latter exploiting the stock of know-how the researcher brings with him or her. Knowledge spillovers may thus be transmitted to other actors mainly through one or more of the four ‘Ps’: publications, patents, people and products.

An implication of the high levels of R&D associated with public investments in space is that these investments may produce very substantial additional economic benefits, which derive from this focus on research and innovation. The knowledge generated from space R&D and, to some extent space production more generally, cannot be entirely appropriated by those conducting the knowledge generating activities, leading to free information or ‘knowledge spillovers’ for others to deploy for innovative purposes.

In the space sector knowledge spillovers can lead to impacts not just in non-space sectors but also in other businesses in the space sector and within space companies themselves. Many space companies are divisions of larger businesses, typically in the wider aerospace and or defence sectors, thus providing opportunities for internal knowledge spillovers to lead to successful commercialisation of ‘spin-off’ products for other business divisions. In this case companies may be able to produce substantial private returns from the public support for space R&D.

A potentially very important category of spinoff occurs where R&D carried out under public contract leads to later product sales to third parties. A new satellite commissioned by a national space agency may, for example, later lead to sales of similar satellites to other countries. To the extent that additional R&D is needed to adapt the satellite to the needs of the third parties, these sales may be considered to result from knowledge spillovers; to the extent that they represent an opportunity for the company involved to generate additional profits from existing knowledge (and to contribute to GDP and employment), they represent an example of market spillovers (producer surplus), the subject of the next section.

17 Jaffe, A.B. (1996), Economic analysis of research spillovers: Implications for the Advanced Technology Programme’, mimeo



Alternative approaches used in the literature that warrant investigation in the current context are:

• Case studies: identification of individual ‘spillover’ innovations and/or other benefits from transmission of knowledge

• Analysis of patent data

• Use of econometric or macroeconomic models

7.2.1 Case studies

These involve investigation of actual or potential knowledge flows from publicly-funded space R&D, or of new products or services resulting from such flows.

Approaches differ in methodology and scope. The BETA group,18 for example, have carried out analyses of the effects of knowledge development and transmission within ESA contractor organisations. An important point here is that, apart from information on the award of ESA grants and the recipients of them, no secondary data is required. Being restricted to the ‘in-house’ impact on ESA contractors themselves, the analysis does not involve consideration of spinoffs to third-party organisations. The problems of identification and attribution associated with such ‘external’ spinoffs are thus avoided at the expense of limiting the coverage to contractor organisations, although within such organisations a wide range of economic benefits is covered, falling into four main groups - technological effects, commercial effects, organisational and methods effects and work-factor effects. As pointed out earlier in the report, ‘internal’ spinoffs can include third-party orders for products or services (possibly with some adaptation) resulting from R&D carried out under public contract.

The Space Policy Institute at George Washington University identified firms who had successfully marketed products traceable to NASA R&D investments – by design, a non-random sample biased towards successful cases was employed. NASA’s spinoff and technology transfer publications were used as a starting point, informal searches and interviews with NASA staff subsequently leading to 41 companies for study. These included firms supported by NASA and also firms deemed to have adopted NASA technology but without formal ties to the Agency. The economic benefits identified were divided into the same four main groups used the BETA group studies.

7.2.2 Use of patents

As described in the OECD Patent Statistics Manual19, patents provide a description of how inventions have been made and the prior research activity on which they depend. In particular, patent citations highlight the use of previous inventions in new inventions – citations of other patents or the non-patent literature help to quantify knowledge transfers across organisations, geographical regions and technology fields, and, importantly in the current context, knowledge spillovers from specific inventing entities such as companies, universities or public research centres to industry. Several studies have shown that the number of citations a patent receives is associated with its technological importance and social value.20

Citations generally result from searches conducted by examiners assessing the degree of novelty and inventive steps undertaken in the development of a new invention. Citations have traditionally been used for (a) the measurement of knowledge flows and spillovers (b) the measurement of patent quality and (c) the strategic behaviour of

18 Bureau d’Economique Theoretique et Apliquee, based at the University of Strasbourg 19 OECD (2009), ‘OECD Patent Statistics Manual’. 20 E.g. Trajtenberg, M. (1990), ‘A Penny for your quotes: patent citations and the value of innovation’,

RAND Journal of Economics, 21 (1) pp. 172-187; OECD Patent Statistics Manual p. 115


companies21. It is useful to distinguish between backward citations, which refer to previous patent documents, and forward citations, citations subsequently received by a particular patent. The extent of forward citations by space-related patents is of particular interest here, since they indicate the presence of knowledge spillovers leading to downstream research efforts.

7.2.3 Applications of econometrics and macromodels

Knowledge spillovers can be represented by means of single-equation econometric model, or within the context of a macroeconomic model that contains explicit representation of knowledge spillovers, resulting from past R&D. In NEMESIS, as an example, R&D ‘stocks’ accumulate (and decay) over time, and are distinguished as to whether they originate from private R&D expenditure, from public research or from foreign sources:

• For spillovers from private R&D, patent statistics are used, together with the OECD Technology Concordance. The latter identifies the probability that a patent with a particular International Patent Classification (ITC) (based on technologies) has a particular combination (I, J) of source (producer) sector I and sector of use J

• Public knowledge stock (as an accumulation of public sector research) is assumed to ‘spill over’ between sectors in proportion to their share of total private R&D expenditures

• Knowledge externalities acquired by a sector J from foreign sources are represented as a sum of foreign countries’ R&D stocks in that sector, weighted by the recipient countries’ imports from each country as a proportion of total domestic consumption of the outputs of sector J

The total domestic ‘knowledge’ accumulated in sector J is then the sum of stocks derived from domestic in-sector R&D and ‘spillovers’ from other sectors and from public laboratories (domestic and foreign). Changes in sectoral total factor productivity and in product quality are then linearly related to changes in accumulated sectoral knowledge.

7.3 Data collection

Chapman (1989) observes that, in the area of spinoffs, ‘the scope is vast and the documentation sparse’. This appears to remain the situation, although it is clearly an area where information is diverse and scattered, and where opportunities for improvement may be limited. In addition, available studies are disparate in their approaches, illustrating the fact that there is no common approach in this area and that the economic effects of a spinoff can be many and varied, and often supported by little or no hard data. This carries the risk that extending the list with factors based on dubious data foundations enables artificially large impacts to be derived.

7.3.1 Case studies: New products and services derived from knowledge spillovers

Basic data sources containing ‘lists’ of spillovers are compiled by NASA and ESA. NASA’s compilation of spinoffs appears in the annual publication Spinoff; the ESA data is compiled from referrals from its Technology Transfer Network and is not in the public domain. The compilations of spinoffs are likely to be incomplete, and (in the case of NASA) are generally stronger on description than quantification of impact, and (in the case of ESA) convey very little information. Also it is difficult to determine the extent of the contribution of space activity, or any evidence on which to base a counterfactual. These factors severely constrain the scope and veracity of impact analyses that can be carried out.

21 OECD (2009), ‘OECD Patent Statistics Manual’.


Data important for assessment of the economic impact of spinoffs may be seriously deficient in the identification of cases of spinoff. There is no guarantee that an important new technology will be identified as being initiated by, or related to, space activity, even where this is the case. Even if identified, Chapman et al. argue that they may not be published in (for example) Spinoff, on the grounds that they are difficult to describe in terms suitable for public consumption. Chapman et al. cite NASTRAN, a computer programme developed by NASA for structural analysis of large rockets and later modified for thousands of non-NASA applications, as an example of this. On the other hand, several products (Teflon, Tang, Velcro) have widely been (wrongly) interpreted as space spinoffs, although not through mistakes or misrepresentations by NASA or other agencies. Additionally, where an appropriate identification is made, there can be great difficulty in determining the extent of the contribution of space activity.

Information currently available on identified ESA spinoffs is limited. The compilation assembled by ESA’s Technology Transfer Network is restricted to the information available to that network, and it is impossible to gauge the comprehensiveness of spinoffs captured through the Network. Information on spinoffs that are identified is patchy, and while detailed case studies are always necessary for a realistic quantified assessment of the economic impact of individual spinoffs, there is a strong case for improvements in the quality and consistency of data obtained by the Network.

This is an important issue. Spinoffs constitute a very significant component of the overall socioeconomic impact of space activity, and are also perhaps the major justification for public investment. They are certainly used as such as a defence against criticism of public investments in space as opposed to investments in other areas of public welfare.

7.3.2 Patent data

The OECD have recently made available to researchers a series of patent-related datasets to allow researchers to conduct their own specific analyses of microdata:

• The OECD EPO/PCT Citations Database provides information on patent and non-patent literature citations contained in patent applications filed to the European Patent Office or via the Patent Co-operation Treaty. The database covers all citations in EPO and PCT patent documents published since 1978, totalling almost one million EPO/PCT patents. For each citation, the origin and EPO search codes are recorded. Summary counts of backward citations (number of citations made) and forward citations (number of citations received) are included for all EPO patents

• The OECD ‘REGPAT’ Database contains patent data linked to names, addresses and low-level regional codes of inventors, and can be combined with the EPO/PCT Citation Database

Both databases include International Patent Classification Symbols (’Search Codes’).

Crucially for our purposes, the OECD monitors space-related patents filed under the Patent Co-operation Treaty (PCT), the European Patent Office (EPO) and the USPTO. Space patents are identified using a combination of codes from the International Patent Classification and key word searches in the patent title. Five domains of space-related patents – some of which are apparently allocated to more than one domain - are identified:

• General satellite technologies (60% of space-related patent applications filed at the EPO over 2000-08)

• Satellite navigation (34%)

• Cosmonautics (28%; Patent category B64G - covers space-related systems and applications including satellites, launchers, components, tracking systems, simulators)


• Satellite communications (18%)

• Satellite Earth Observation (less than 1%)

The latest OECD Patent Database is dated 2010, with an accompanying 2009 ‘Patent Statistics Manual’. The statistics show a significant reduction in space patents after 2002, particularly in the US – apparently a statistical aberration due to delays in updating databases. Patents filed under EPO and USPTO both rose rapidly in the late 1990s and have roughly plateaued since. Downstream products and services have apparently gained in importance relative to ‘cosmonautics’. The OECD report points out that innovative activity in space may be under-represented owing to secrecy around some areas of space R&D.

The following chart shows numbers of patents, broken down into five areas or ‘domains’ of space activity.

Figure 11 Breakdown of space-related patents by main domain (2000-2008)

Source: OECD (2011), ‘Space Economy at a Glance’

7.3.3 Other available data on invention and innovation

Firm-level innovation surveys have emerged as an important complement to the classical but more indirect considerations of R&D expenditure (innovation input) and patents (an intermediate metric). Innovation surveys are now conducted by national statistics offices across the EU (i.e. the Community Innovation Survey or CIS) every two years, and the harmonised surveys and results permit analysis of trends in innovation across sectors and regions. The results are reported separately by Eurostat in its science and innovation indicators and also compiled in the biennial European Innovation Scoreboard, alongside other metrics on framework conditions (e.g. educational attainment), BERD and patent applications. Equally important, the CIS is widely replicated around the world, and there is now a growing body of innovation data available for academic, policy makers and others to reflect upon.

The OECD Innovation Microdata Project, launched in 2006, makes use of survey data (notably from the EU Community Innovation Survey) to derive internationally co-ordinated results on innovation indicators and (from econometric analysis) on relationships between innovation and various economic, and policy-related factors.22

22 OECD (2009): ‘Innovation in Firms: A Microeconomic Perspective’

59.6%

36.0%

25.3%

16.1%

0.2%

60.5%

33.7% 28.9%

17.8%

0.5%

50.2%

36.4% 31.8%

12.8%

0.5%

General satellite technologies

Satellite navigation

Cosmonautics (B64G)

Satellite communications

Satellite Earth observation

Patent applications filed under the PCT Patent applications filed to the EPO Patent grants at the USPTO


Unfortunately, while offering an increasingly powerful means by which to compare performance among nations and test policy portfolios, the surveys are generating data from a few thousand businesses in each country, encompassing the entire economic spectrum, and as such they are too coarse to investigate the space sector specifically. In a majority of countries, there will be very few or no returns from businesses involved in the space sector, and as such, these important databases cannot currently offer an alternative to the patent data approach discussed above for that sector.

7.4 Analysis

In a recent presentation to the International Astronautical Congress,23 results of eight historical studies of NASA technology transfers (spinoffs) were presented,24 several based on the compilations in the Spinoff publications, others on modelling and simulation. Estimated benefits are unanimously impressive, though difficult to compare directly – some studies quote benefits in terms of increased sales or cost savings, others in terms of value added and/or jobs, others in rates of return per $ of NASA investment. While noting the impressive results, the NASA presenters complain of inconsistent assumptions and measures, irregular occurrence and non-sustainability of studies, and difficulties of aggregation.

In very general terms, a typical feature of such studies appears to be the lack of a counterfactual – what would have happened (to the resources used in the space activity, and consequently to the overall economy) in the absence of the NASA support? This apparent neglect may well be due, at least in part, to restrictions imposed by lack of available data, considered further below.

Analytical options are considered further in sections 7.6 and 7.7.

7.5 Scope

The scope of the expected results could be the knowledge spillovers of total (or publicly-funded) European space activities, requiring consistent international-level data, or the knowledge spillovers on specific national economies, or (at least in principle) knowledge spillovers at a sub-national regional level. The scope of a study could also relate to particular public space investments, e.g. projects or programmes. There is a need to address issues such as leverage of public funds, substitution, and additionality.

Case studies of knowledge spillovers have been carried out at various degrees of breadth and depth. The BETA studies referred to above can be described as deep but narrow – they are limited to spillovers realised within space contractor organisations, but within that explore a range of benefits including not only impacts on productivity and sales but also on business organisation and methods, on development of human capital, and on the development of new collaborations and networks. Other studies focus on particular products or processes derived elsewhere in the economy indirectly from space research.

7.6 Implementation

7.6.1 Case studies

Because of importance in the rationale for public investment in space, improvements in the data relating to spinoffs and analysis of their impacts appear to be highly desirable. There is also the need to improve the veracity of existing information on

23 Comstock, D. and Lockney, D. (2011): ‘A Structure for Capturing the Quantitative Benefits from the Transfer of Space and Aeronautics Technology’, Innovative Partnerships Office, NASA Office of the Chief Technologist. Presentation to the International Astronautical Congress, Cape Town, South Africa

24 The studies cited were carried out between 1971 and 1997, reinforcing the impression that little work of this nature has been carried out over the last 15 years or so.


space-related spinoffs – as indicated above, the examples of Teflon, Velcro and Tang, widely thought to be spinoffs from space programmes but in fact invented previously, and widely used in space programmes – indicates the importance of the care required in attributing products to spinoffs in space.

There is a case for a substantial review of collection of information on spinoffs by ESA and other European agencies, with a view to improving coverage, quality of information and consistency. Such a review should also consider any lessons that can be learned from NASA’s procedures in compiling its Spinoff publication – while itself limited in various areas, it does provide more information, and is more accessible and consistent, than its ESA counterpart.

The data required for case studies needs to be collected on an individual basis in the course of the study. The main requirement here seems to be for a consistent approach to the assessment, with clear statements of impacts included and not included, perhaps leading to documentation produced by ESA for ‘best practice’ in conducting such assessments, analogous to the UK Treasury’s ‘Green Book’ on best-practice guidelines for investment appraisal. Particular care is needed to take account of the risk of ‘optimism bias’, which some argue is endemic in the project assessment community.25. In particular, over-optimism can take the form of exaggerating additionality – the contributions of public funds to projects which in some cases may have gone ahead in some form without the grant – and to ignore or understate opportunity costs (or, equivalently, the counterfactual).

To take account of this, impact assessments should ideally include assembly of data on issues such as displacement, (the negative effects on sales of existing products, and on the firms that produce them, from substitution by new space-derived products). In addition, the results of employing resources devoted to space in other areas. There is of course also the risk of double counting26.

Methodologically, case-study-based analysis of the impact of knowledge spillovers should be as broad as possible, covering all of:

• In-house contractor benefits, including human capital and organisational benefits, as in the BETA studies, and including knowledge used to supply third parties with products or services resulting directly from a public contract

• The international dimension of spillovers

• Net economic benefits from innovations derived from knowledge spillovers, following a methodology we have used in earlier studies (including that of the impact of British National Space Centre programmes)

25 HM Treasury, ‘The Green Book – Appraisal and Evaluation in Central Government’. This document notes that ‘There is a demonstrated, systematic, tendency for project appraisers to be overly optimistic. This is a worldwide phenomenon that affects both the private and public sectors. Many project parameters are affected by optimism – appraisers tend to overstate benefits, and understate timings and costs, both capital and operational’.

26 E.g. the value of industry sales includes the costs of bought-in (indirect) supplies – value added is the preferred concept – and sales are also covered in procurement expenditures by public bodies.


Figure 12 Microeconomic impact methodology

Source: Technopolis

The items for which data need to be sought (typically by interview and/or survey) are as follows:

• Inputs, Typically, a publicly-supported project will be financed by at least matching funding from the private companies carrying out the research, who may also meet subsequent development/production costs

• Outputs, in particular benefits to participating organisations, in terms of increases in sales, value added and profits. Sales may include subsequent public-sector grants27 which follow from the case study but which do not form an integral part of the inputs to it. Benefits will typically accrue over a number of years and the estimated need to be subject to an appropriate discounting procedure

• Additionality, is an estimate of the extent to which support was necessary for that part of the work to go ahead and for the benefits to be realised28

• Spillovers and Multipliers, the latter generally derived from a macroeconomic model

• Displacement effects, these require a judgement regarding the extent to which sales arising out of innovation substituted for sales the business might have been expected to secure in any event (presumably with lower returns), or indeed the

28 Different categories of additionality are recognised in the literature, relating for example to the effects of a

grant on total project inputs, outputs/benefits, or firm behaviour. Here we are concerned with estimating the extent to which the grant was required to realise the economic benefits identified in the table. Thus 100% additionality implies that none of the benefits would have been obtained without the grant – the project would not have been carried out and other beneficial contracts assumed to be dependent on it would not have been won. In such a case, a firm may have devoted resources to other development projects (not necessarily in the space sector) yielding some returns, presumably lower than those obtained under the BNSC award.

Financial inputs from public and

other sources

Financial inputs by

private companies

Total financial inputs

R&D, invention, innovation

Outputs – increased turnover

(discounted)

displacement Net effect of support

for producer

Total net economic

effects

spillovers

Output additionality (deadweight)

multipliers


sales of its competitors. Thus a displacement of 30% suggests that 70% of outputs contributed a net economic benefit, other things being equal

7.6.2 Analysis of patents

We propose that these patent data could be applied as follows:

• ‘Backward citations’ are a useful measure of the sources of knowledge for space research – a measure of the ‘spin-in’ of technological data assisting and informing the development of space inventions

• ‘Forward citations’ can be used for impact analysis of areas where space-related patents are most frequently used, and in particular to identify particular inventions which are dependent on prior R&D in the space area. This represents a potentially useful route for the identification of important knowledge spillovers from space sector research

• Mapping flows across economic sectors requires translation of technological areas specified in patent documents (the International Patent Classification system is a technology based system not a sectoral one) into industrial sectors (the supplier or user sectors). However, can be done using the OECD Technology Concordance29

We suggest that the latter procedure could be used to map spillovers in some general sense from space-related technologies to technologies in the rest of the economy, which would be a useful supplement to the current stock-taking mechanism. Presently, the ESA Technology Transfer Network records and publishes basic information about any examples of spinoffs from ESA contracts that are identified by its agents or ESA contractors.

Ultimately, when properly calibrated, such a mapping procedure could be used to produce a quantified assessment of the impact of knowledge spillovers from the space sector to the rest of the economy, which in principle could be added to Tier 1 impacts and to producer/consumer surpluses to yield an overall measure of the economic impacts of public investments in space to European economies. Clearly, there would need to be a substantial amount of further development in order to monetise such indicative flows in a credible manner.

Further investigations of data availability/quality, based on the OECD-prepared patent data, are needed to assess the possible applications, but these may include:

• Following Jaffe, statistical analysis of the relationships between firm-level patenting activity and own-firm R&D and ‘other firm’ R&D, to assess the importance of private and social returns

• Country comparisons of R&D and patenting activity

• Subsector comparisons (within the space sector) to determine which areas of R&D are the most ‘productive’ in terms of inventions

• Use of patent citations to introduce a measure of patent ‘quality’ into the above

We recognise that analysis of patents has its limitations in any sector, however it may be especially challenging for space, where other forms of protection may be preferred (e.g. secrecy considerations particularly for military applications of space) and this combined with a highly concentrated global industry and small number of clients means we see patent output numbering in the hundreds rather than tens of thousands. These characteristics are likely to be more or less pronounced in different application fields, too. We also acknowledge the use of patents for tactical reasons, and that the commercial value of patents is uncertain and exhibits very high levels of variance, and

29 Johnson D.K. (2002), ‘The OECD Technology Concordance’ (OTC): Patents by industry of manufacture and sector of use’, DSTI/DOC(2002)5.


that the importance of a particular citation in a patent application is highly variable. Despite all of these measurement and valuation issues, the OECD patent data represents a potentially valuable new addition to the evaluation toolbox for space, which could provide a potentially novel insight into the map of technological relationships within space and between space and other sectors

7.6.3 Econometric models

Some authors have used econometric techniques to investigate characteristics of knowledge spillovers, in some cases calibrated using data from Community Innovation Surveys.30 Capron and Cincera, for example, look at the role played by universities in providing technological information in R&D collaborations, while Monjon and Waelbroeck31 investigate the impact of several types of knowledge spillovers on the decision to innovate, concluding that a wide range of information sources are important.

Macroeconomic models offer another possible analytic vehicle, with incorporation of representation of knowledge spillovers.

Given the relatively small size of the space sector the highly skewed nature of the benefits from knowledge spillovers, it does not seem that such routes offer a cost-effective approach to analysing the impacts of knowledge spillovers in that sector.

7.7 Future Development Options

Development options, in order of increasing effort required, are as follows:

Status quo

Applying current methodologies and existing secondary data:

• Use of existing estimates of the importance of knowledge spillovers, assuming the space sector to be typical (in terms of spillovers) of sectors where such studies have been carried out. This involves derivation and use of ‘stylised facts’ or ‘rules of thumb’, e.g. one notable spillover worth €Xm expected per €Ym of expenditure

Low-level additional effort (100 person days):

• Review of current systems for identifying spillovers

• Surveys of firms for systematic identification of spillovers, perhaps with incentives

Moderate additional effort (300 person-days):

• Improved identification of cases combined with data collection on benefits, as above

• Case studies of known examples, using a comprehensive methodology with estimation of gross and net (inclusive of opportunity cost) impacts

• Use of patenting data to (a) highlight particular spillovers for investigation and (b) enable citation analysis for levels and trends in cross-fertilisation between space and other sectors

This is the recommended option. The additional contribution of patent data should be considerable: OECD’s patent database and its ongoing identification of space patents are new and highly relevant developments

30 E.g. Capron, H and Cincera, M. (2003), ‘Industry-university S&T transfers: What can we learn from Belgian CIS-2 data?

31 Monjon, S. and Waelbroeck, P. (2003), The nature of innovation and the origin of technological spillovers: an econometric analysis on individual French data’


Major additional effort (500 person-days):

• Improved identification of cases combined with data collection on benefits

• Use of patenting data, as above

• Incorporation of potential for knowledge spillovers into a major new modelling initiative to assess the benefits of public expenditures in space, including patenting information. Under this option, analysis of knowledge spillovers would be incorporated into an overall framework which includes all economic impacts of public space investments, as discussed in Section 3.

8. Market Spillovers

8.1 Introduction

These impacts arise from ‘leakage’ of benefits through the operation of market forces, which tend to cause some of the benefits from a new product or process to accrue to buyers. Competitive pressures mean that prices do not fully reflect the ‘willingness to pay’ of purchasers. This can produce consumer or producer surplus, the former representing benefits accruing to the buyer, the latter to the seller.

Thus consumer surplus is the difference between the price that the consumer is willing to pay and the actual price paid and producer surplus is the difference between the price at which a product is sold and the lowest price at which the producer is prepared to sell. The fact that a producer will sell at lower than the actual price yields the potential for profits which provide a measure of producer surplus.

In particular, the downstream space sectors develop innovative value-added products and services based on space infrastructure (satnav, satcom and EO systems) that are either entirely new or superior to those that they replace, offering enhanced performance and functionality or supporting entirely new activities by their users. However, as a result of market forces the price does not reflect the full value of these new /superior products and services, leading to an economic gain or ‘market spillover’ in the form of a consumer or producer surplus. For example the performance and functionality of personal computers has increased substantially over the last 10 to 15 years due to technological developments but the purchase price (in real terms) has decreased, yielding substantial ‘unearned’ benefits to users.

The introduction of new products or processes typically leads to both producer and consumer surpluses. In the short term, the producer may enjoy a large advantage over competitors, yielding relatively high surpluses in the form of ‘superprofits’; in the longer term, these are typically eroded away in the face of competitive pressures forcing price reductions, with benefits moving in the direction of the consumer. Nordhaus32 uses data relating to the American economy over the period 1948-2001 to estimate the proportion of social returns from technological advances accruing to producers and consumers, respectively; the conclusion is that most of the benefits are passed on to consumers, with innovators capturing only about 2.2% of the total social surplus from innovation. This figure follows from a typically low rate of initial appropriability (around 7%) immediately following the innovation; combined with a high subsequent rate of depreciation of the innovation-related profits.

32 Nordhaus, W.D., ‘Schumpeterian Profits in the American Economy’, 2004



Producer surplus can be estimated from profits derived from an innovation, i.e. revenues derived from it (product sales, and perhaps IP related sales such as licenses) minus costs of R&D and manufacture, items not relatively available from secondary sources but potentially available on a case-study basis.

Consumer surplus can – in principle - be estimated from a ‘demand curve’ showing quantities demanded as the price varies; Figure 13 shows the simplest case of a linear demand curve, the shaded area (0.5*Q*(PMAX – P*)) representing the consumer surplus.

This is the total excess above the asking price P* that consumers are willing to pay (PMAX being the most any consumer is willing to pay). While data needed to estimate the demand curve is rarely available, approximations to the consumer surplus can sometimes be made from an assumption of a linear demand curve and an estimate of the price elasticity of demand of the product, or of similar products.33 In many cases, consumer surplus may more readily be estimated from reductions in price or improvements in quality compared with pre-existing products satisfying similar requirements, requiring the availability of appropriate comparative data.

Figure 13 Example of a linear demand curve

Source: Technopolis

Consumer surplus can only be realistically handled on a case-by case basis, and the overall importance of this component of the economic impact is thus dependent on the effectiveness with which spillovers from space activities are identified.

Consumer surplus is ideally estimated through the use of consumer demand curves, although such an approach is rarely practical. In practice, consumer surplus resulting from an identified innovation can be assessed using:

• ‘Willingness to pay’ analysis: surveys of consumers of particular space-derived services to assess the extent to which they would have been prepared to acquire the service at a higher price

• At a ‘lower limit’ estimate of consumer surplus, comparisons can be made between the costs of the new service (such as satellite navigation) and the costs of services it replaces (such as map reading). The ‘additional’ consumer surplus provided by

33 In this case consumer surplus equals 0.5*P*Q*/η, i.e. one-half of revenue divided by the price elasticity.


the new service will normally be a combination of the price advantage and the quality improvement it offers over its substitute (one of these factors may be negative, for example the new product may be more expensive but offer higher quality which more than compensates)

8.3 Data collection

Primary data is normally collected on a case-by-case basis. Ex-ante estimates of surpluses can be based on assumed price elasticities or ‘willingness to pay’ approaches, while ex-post estimates can be derived from market penetration and financial benefits from efficiency and/or quality improvements.

Many studies of producer and consumer surplus (such as the ‘value of information’ study by the UK Office of Fair Trading, EC49) identify lack of data as a key constraint, requiring the collection of primary data on a case-by-case basis - data from value of information studies should in principle be collectable for the analysis of space applications - or the use of ‘reasonable’ assumptions, ideally accompanied by estimates of the sensitivity of conclusions to those assumptions.

In the absence of usable estimates of price elasticity, an essential requirement for the estimation of consumer surplus associated with a new product is identification of a close existing substitute for the product, for which the new product may itself substitute. The consumer surplus (or the increase in it) may then be estimated from comparisons of price and quality, i.e. the extent to which the new product represents an improvement over those previously available.

8.3.1 Need for further data collection

Most of the areas of work identified in this section are concerned with the microeconomic level, and potential requirements for new data are:

• The identification of relevant space cases generating producer and/or consumer surpluses, similar to the issue discussed in the previous section on knowledge spillovers. Here however, the evidence to be sought relates not so much to identifying product and service spillovers, particularly in non-space sectors, resulting from space-related R&D, but rather to sales of particular novel devices and services, to be followed by an analysis of the division of ‘surplus’ benefits between consumers and producers

• Most data required for analysis of producer and consumer surpluses needs to be collected on a case-by-case basis. However, classification of surpluses, their association with particular groups of beneficiaries, and identification of existing substitutes might prove to be a valuable exercise

8.4 Analysis

A recent study by Analysys Mason however, finds that consumer benefits from the deployment of high speed broadband are small, where ‘consumer surplus benefits represent only 1.6% of those gained from input-output calculations’. It seems likely, though, that consumer surpluses resulting from widely adopted services such as satellite navigation are very large.

In each case selected, analysis would comprise:

• Assessment of the demand, over time, for the space-derived product or service (any appropriate units)

• Estimation of the saving, and/or the value of quality improvement, compared with the nearest alternative (e.g. maps, terrestrial-based weather forecasts) per unit of demand


8.5 Scope

Like most others, this issue can be addressed:

• At the macro level, with an attempt to assess the total benefits (nationally or internationally) of space activity

• At the micro level, with reference to individual projects or programmes

• Ex post, on the basis of observed market penetration/sales

• Ex-ante, on the basis of expected market penetration/sales (perhaps with alternative low/medium/high scenarios)

8.6 Implementation

Areas where public investments in space can generate consumer and producer surpluses include:

• Technologies that lead to or support the development of new products, for example products derived from the availability of the satellite-based navigational signal, improving locational accuracy and ease of navigation

• Data from earth observation satellites leading to, for example, improvements in weather forecasting, of potential value to farmers (e.g. to help inform harvesting schedules) and the electricity supply industry (improving demand forecasting)

• Spillovers to other industries applications leading to private and social returns in non-space area

8.7 Future Development Options

Status quo Use of the currently available estimates of costs and benefits, including profits and price-reduction opportunities and quality improvements, of existing or planned initiatives where major studies have already been carried out, such as for GMES and Galileo.

Low-level additional effort (50 person-days):



Moderate additional effort (50 person days initially, with additional ongoing resource needs):

• Compilation of major outcomes from space investments, and analysis of them, as in ‘low-level additional effort’ as above

• Ongoing inclusion of assessment of consumer and producer surpluses from new developments as they occur, as a routine component of evaluation and monitoring of the impacts of public investments in space.



9. Economic impacts – in summary

The preceding sections describe the methodological options and associated data requirements for quantifying five very different types of economic impact, in a discussion that extends across more than 30 pages and gets really very technical in parts. So, here we have attempted to summarise matters.

Figure 14 shows the main economic impact categories identified, and recommended approaches to their evaluation.

Direct impacts are obtained from large-scale surveys of individual actors, and spillovers basically need treatment on a case-by-case basis of some kind. Results from these categories can feed into an ‘accounting framework’ for aggregation. Indirect and induced impacts require a modelling framework, generally input-output for the former, and a causal macromodel for the latter, which may be combined in one model.

Results from all five categories combined yield what is here called ‘Total Gross Economic Impacts’. This does not account for benefits foregone resulting from the resources used for being unavailable for use in other areas, such as public works or reductions in taxation. These foregone benefits may be greater or lesser than the benefits from space investments, the difference being ‘Total Net Economic Impacts’.

Figure 14 Economic Impacts: Summary Chart

Both gross and net benefits are important. The former reveals the nature and extent of the economic benefits obtained from public expenditure on space, that economic (as well as other) returns are generated. However, opportunity costs should not be ignored, and at least awareness should be shown, perhaps with some precautionary discount applied to the gross estimate, even if the true opportunity costs can’t be estimated accurately. This would be expected by Finance Ministries, and would also help to highlight the extent to which space expenditures produce economic benefits additional to those gained from other public expenditures or policies.


ENVIRONMENTAL IMPACTS

10. Introduction

10.1 Definitions

Investments in space infrastructure provide either data (about the Earth’s atmosphere, oceans, land cover etc., scientific data on the solar system/universe, position and time etc.) or capabilities (communications, access to space etc.) that are used by individuals, the public sector and businesses for activities that intentionally or unintentionally lead to environmental effects.

Earth observation from space has explicit environmental objectives and therefore intended environmental effects through its contribution to an improved understanding of the environment leading to improved environmental policy-making and methods to monitor environmental features in support of environment policies The objective of these environmental policies is, ultimately, the protection and improvement of the environment and therefore space investments contribute to the intended (positive) environmental impacts in areas such as levels of greenhouse gases in the atmosphere, biodiversity, forest cover, air/water quality, etc.

For investments in satellite navigation, satellite communication and space R&D, any environmental impacts are typically unintentional and a result of downstream applications that lead to reduced emissions, energy efficiency etc. or are due to spillovers where technologies developed for space are used in other applications and sectors such that they lead to environmental impacts.

Therefore two categories of environmental impact are defined (Figure 15).

Figure 15 Definition of environmental impact categories

Impact category Definition Quantitative indicator(s)

Environmental policy-making

The contribution of space investments to: • Identification of environmental

problems/issues that require policy action

• The development of appropriate policies to protect /preserve the environment

• The effective implementation of environmental policies (e.g. monitoring environmental parameters)

• Number of policies created (wholly or in part) as result of new knowledge/understanding from space investments

• Number of policies whose implementation is dependent (wholly/ partially) on space investments/infrastructure

• Number of policies in development dependent (wholly /partially) as result of new knowledge/understanding from space investments

Positive effects on environmental parameters

The contribution of space to improvements in environmental parameters, arising for example from: • Implementation of environmental

policies

• Positive environmental effects resulting from downstream applications and/or spillovers

Environmental parameters, including: • Greenhouse gas emissions

• Areas of forest cover

• Areas of productive land (for agriculture)

• Biodiversity / ecosystem services metrics

• Etc.


10.2 Overview (and rationale) of methodologies recommended

The review of methodologies and data in the earlier part of the study revealed that there have been very few previous studies on the impact of space on environmental policy-making with most studies focusing on the impact on environmental parameters. Our recommendation focuses on both impact categories because the primary role of space (particularly the investments in Earth observation that have explicit environmental objectives) is to provide data and information about the environment that enable others to make decisions and act to improve it. The policies are then intended to lead to positive environmental effects. Space investments contribute to the positive environmental effects along with the data inputs, knowledge and actions of a wide range of other actors. As previous studies have shown, the link between the space contribution and the environmental impact is not straightforward or easy to identify34 and therefore it makes sense to consider the important intermediate policy-making stage in improving the environment. In addition to Earth observation other space investments can lead, usually unintentionally (at least from their original purpose) to an improved environment, or at least, a less degraded environment. These are, in economic terms, considered to be ‘externalities’ of the space investments but for the assessment described here are treated in tandem with the intended positive environmental effects of Earth observation.

There have been just a few studies on the role of space in environmental policy-making and these have used a historical narrative approach. These provide rich and detailed accounts of the role space investments have played and are a valuable source of evidence of impact. There appears to have been no attempt to assess the scale or extent of the role of space across a range of different environmental policies. Therefore we recommend a method that balances the detailed information provided by historical narratives with a survey of environmental policy-makers to provide quantitative and qualitative information on the extent of the role of space.

There have been many more studies of the contribution of space to positive effect on environmental parameters, however while data sets exists for many key environmental parameters, the methods deployed all suffer from the difficulty of disentangling the contribution of space investments from all other investments made. Furthermore most of the studies of environmental impact focused on developing projections of future impacts (ex ante studies) rather than estimates of impacts achieved to date.

The challenges of attributing environmental of impacts to space investments are well-known and the European Commission has put considerable resources into researching the issue further. This has resulted in the development of a macro-scale model (the FeliX model) specifically designed to trace the effects of investments in space-based and terrestrial Earth observation systems and we recommend that this model be utilised, and possibly developed further, to model past (ex post) space investments and environmental impacts. We believe there is no other model with a focus so close to ESA requirements. We recommend that this be complemented with detailed micro-level case studies of specific examples of investments and impacts to develop a better understanding of the contribution of space to specific impacts. The case studies will provide evidence of impact in their own right and contribute, over time, to improving the macro-level model.

We do not cover the negative environmental effects of space investments. The small number of studies that addressed the environmental impacts of space launches were reviewed, and all suggested that the negative impacts were relatively low. Of course, this may change with time, if launches become more frequent and/or fuels change. Furthermore the economic activity stimulated by space investments (as for all investment) will have contributed to broader negative environmental impacts.

34 As reported in TN1 and TN2.


However, for the present study, this layer of complexity is not specifically addressed but its absence should be noted when positive impacts are reported.

Figure 16 Recommended methodologies: environmental impacts

Impact category Recommended methodology Fall-back position

Environmental policy-making

Mixed methods - a combination of: • Regular surveys of environmental policy-

makers to determine role of space investments in (i) identification of environmental problems /issues; (ii) policy development; (iii) policy implementation

• In-depth historical ‘tracking back’ case study (studies) of space contributions to specific and important environmental policies or treaties

There are no existing alternatives or established processes in place to assess this impact category or relevant data sources that could be used.

Positive effects on environmental parameters

Mixed methods - a combination of a micro and macro approaches: • Detailed case studies of identified benefits

(micro level) • Application of the FeliX model to space

investments (macro level)

There are no real alternatives based on existing methods and existing data as previous studies:

• Are ex-ante assessments • Cover different geographic regions • Suffer problems of attributing

impacts to space investments

11. Environmental Policy-Making

11.1 Methodology

We propose a mixed methods approach that will provide (i) quantitative data to demonstrate the extent to which space investments have provided the knowledge required to identify, develop and implement environmental policies and (ii) qualitative data to demonstrate the important or critical role that space inputs have played in specific policies or policy areas.

The mixed methods approach entails a combination of:

• Regular surveys of environmental policy-makers to determine the role of environmental policies role of space investments in (i) identification of problem where action is required, (ii) policy development and (iii) policy implementation

• In-depth historical ‘tracking back’ case studies of space contributions to specific and important environmental policies or treaties

The survey would be aimed at environmental policy-makers at national, European and possibly international levels to develop a broad and quantitative account of the role of space investments in terms of its extent (how many environmental policies make use of space investments) and its relative importance (what proportion of all environmental policies make use of space investments).

The survey will provide a broad but fairly ‘shallow’ account of the use of space investments. Therefore we recommend that it is complemented by more in-depth studies of the role of space investments in environmental policy-making by studying specific examples of either particularly important policies and/or policies where space is known to have played a key role. The case studies will be ‘historical’ focusing on past policy development and past/current implementation where the role of space can be shown to be tangible and actually realised rather than on current or forthcoming policy developments where the role and policy benefits are largely projected into the future. They will provide detailed narrative accounts of the role space has played in developing and/or implementing important environmental policies.


11.2 Data collection methods

11.2.1 Surveys of environmental policy-makers

There is no existing data available to support an assessment of this impact category, therefore primary data collection is necessary.

The first time such a survey is run, a database of survey recipients will need to be created. While this is not a trivial undertaking, potential recipients would be expected to be located in government departments responsible for environmental policy making and public agencies responsible for implementing environmental policies. It might be possible to identify recipients via professional associations, memberships of international policy-making fora and other such bodies. The aim is to reach as wide a group of policy-makers as possible at the European and international levels and representative samples at national levels.

In principle an on-line survey is the most efficient mechanism for conducting surveys however in the first run it would be appropriate to interview (face-to-face and telephone) a small group of environmental policy-making experts to understand how best to approach the community and to trial a draft questionnaire. After the trial, the questionnaire and the survey delivery method (online survey, telephone, face-to-face) will be finalised for future surveys.

The survey will collect primary data on:

• The number of policies in place, in development and that have made/ continue to make use of space data/capacities

• The total number of policies in the environmental field

• The ‘top’ 5 or 10 policies in terms of their impact, or expected impact, on the environment

11.2.2 In-depth historical case studies

The field of environmental policy-making is highly complex and a survey can only tell us so much. Gaining an understanding of how space investments have made an impact on environmental policy requires the gathering of more complex qualitative data on how space-derived data and knowledge has influenced and informed policy-making and/or is used in supporting policy implementation. Data collection will involve:

• Desk research and interviews with environmental policy experts to identify and select important/critical environmental policies where it is known that space investments have played a key role. Examples can be considered at national, European and international levels

• Desk research and literature review of the policy selected for study

• Primary data collection: exploratory semi-structured interviews with key actors in the policy development from a range of groups: environmental policy-makers, environmental scientists, space community, industry and NGOs, using an approach based on development of an historical path from the policy as implemented to its origins

11.3 Data analysis and interpretation criteria


The data provide by the survey respondents will be aggregated and grossed-up statistically (where appropriate such as for the national samples) to provide:

• Number of environmental policies created wholly as result of new knowledge/understanding from space investments

• Number of environmental policies created partially (and an estimate as to what extent) as result of new knowledge/understanding from space investments


• Number of environmental policies whose implementation is dependent wholly on space investments

• Number of environmental policies whose implementation is dependent partially (and an estimate as to what extent) on space investments

• Number of environmental policies in development dependent wholly on new knowledge/understanding from space investments

• Number of environmental policies in development dependent partially (and an estimate as to what extent) on new knowledge/understanding from space investments

• Questions will also seek to understand the alternatives to space investments, such as access to data from terrestrial sources, to provide an analysis of what might have been happened without space investments

Analysis of the survey data would provide:

• An assessment of the proportion of all environmental policies that rely on space investments

• A qualitative assessment of the role of space investments

• Identification of the key policies in terms of actual or expected environmental impact and determine how much these rely on space investments. These policies can be considered as candidates for the in-depth historical case studies


The historical narrative is intended to identify and describe the exact role played by space investments in important environmental policies. The aim to identify: what space investments have been used; how they have been used; and what their exact role has been. For example the role of space-derived data might include:

• Providing data to contribute to the scientific understanding of a key environmental process

• Providing critical data to demonstrate to policy-makers and/or general public that an environmental issue warrants action

• Providing data for establish a baseline and monitoring process for an environmental parameter(s)

• Contributing to the assessment of environmental parameters on a global scale

Finally the assessment will address how critical the space-derived data has been to policy-making and policy implementation and if there were any viable alternatives that would have led to the same outcome.

Depending on policy/ instrument studied, it may be possible to provide a quantitative estimate of the relative scale of space-derived data/knowledge, as compared to other sources, underpinning to the development of the policy.

11.4 Scope


The survey would have a broad scope – targeted at all key environmental policy-making bodies at European and international levels and a statistically representative sample at national level.

The robustness of the survey is dependent upon two factors: a well-designed questionnaire; and reaching the most appropriate individuals in policy-making bodies.



By the very nature of case studies the scope is narrow, focusing on specific examples, but with the scope growing over-time as more case studies are completed. However the coverage can be focused on what are believed to be (by experts) the most important policies ensuring that while the scope is limited, the importance and relevance is high.

The robustness is dependent on the level of resources (in time and money) available to conduct the study. There is a risk of optimism-bias from interviewees but this can be mitigated as far as is possible by gathering data from a broad cross-section of interviewees.

11.5 Implementation


The implementation process will entail more resources the first time the survey is implemented to:

• Build a database of relevant policy-makers

• Develop, trial and modify the questionnaire and survey delivery methods

• Run and analyse the survey results for the first time

• Review the process and results, improve the process/data collection tools and define the future regularity of the survey

The level of resource for the first implementation is estimated to be:

• 80-100 person days over an elapsed time of 6 to 9 months

Subsequent implementations will require slightly less resources (40-50 person days), but depending on the time between surveys the database may need to be reviewed and updated each time.

All data to be analysed is new primary data and therefore the overall success of the survey is highly dependent upon identifying the appropriate survey recipients, this may be costly to generate for the first run. Alternative approaches could involve disseminating the link to an online survey via professional associations.


A detailed in-depth historical study entails:

• The selection of a key policy for the study

• Desk research to identify background documentation and interviewees

• Extensive desk research, literature review and a programme of interviews

• Analysis and development of a historical narrative

The level of resources for the first implementation is difficult to estimate accurately as it depends on scale of the policy selected (e.g. the Kyoto Protocol vs. a national policy on air quality). However we make the following estimate for a study of fairly large-scale policy:

• 70-80 person days over an elapsed time of 6 to 12 months

The study is dependent upon secondary data (documentation) and primary data (interviews) and while it might be feasible to attempt to produce a case study based on desk research alone, there would be the risk that the contribution of space investments, particularly their criticality to key decisions, might not be visible.


Climate change is a considerable concern for environmental policy makers and an ex ante impact assessment of GMES35 estimates that the costs of adapting to climate change are where most of the benefits of GMES will lie. Therefore a case study of key climate change policy or treaties might be appropriate. At an international level, climate treaties are addressed by the UN Framework Convention of Climate Change, the organisation responsible for the Kyoto Protocol. A case study could investigate the role of space in developing the protocol and/or the scale and importance of its inputs to the IPCC reports that underpin the Kyoto Protocol.

An alternative case study might be the Vienna Convention – the international agreement that underpins intergovernmental cooperation on research, observation and exchange of information on the ozone layer.

11.5.3 Relevance of the methodology

Environmental policy-making is an important impact domain for space-based Earth observation and its role in policy-making is particularly under studied and therefore not well-understood. It is generally accepted that space plays an important role, and there is no reason to suggest otherwise, but existing evidence would appear to reside within the tacit knowledge base of the space and environmental policy-making communities. Therefore an exercise to make the knowledge more explicit would make a relevant and valuable contribution to identifying and understanding the impact of space investments.

The combination of a broad-based survey and detailed case studies will provide an analysis of the scale of the impact (how many policies and how often) and the extent of the space contribution (how critical is space to the policies), plus insight into the role played by space investments and mechanisms by which they influence policy-making.

There is no fallback methodology for this impact category as there are no suitable alternative sources of relevant data and information.

11.6 Future development options

The future development would entail the improvement of the survey methodology as it is implemented over a number of cycles and a programme of historical case studies to build a portfolio of evidence.

12. Positive Effects on Environmental Parameters

12.1 Methodology

As described above it is extremely difficult to disaggregate the role of the space contribution to changes in environmental parameters. This is compounded by the fact that any historical data on environmental parameters have been collected in a context where space inputs already exist and therefore constructing a baseline is also challenging. However the investment in GMES has increased the interest and investments in developing methods to assess socio-economic benefits related to Earth observation, for which a large proportion of the benefits are in the environmental domain. Therefore we recommend building on the work being done in this field.

As for the impact on policy-making, we recommend a mixed methods approach that combines:

35 PWC, Socio-economic benefits analysis of GMES, 2006


• A comprehensive macro-level modelling methodology (the FeliX model)36 with

• Detailed micro-level case studies of identified environmental benefits


12.2.1 Macro-modelling with the FeliX model

The FeliX model has already been developed but would need some modification to focus only on space investments (rather than all space and non-space data input to GMES) plus input data on relevant space investments. Making the modifications requires the construction of a number of simulation scenarios based on the inputs of experts collected over a three-day workshop.

In order to conduct the assessment that would be suited to ESA’s expectations, the following inputs to the FeliX model would be required:

• Financial investments in space-based EO over past (20-30 years or longer – subject to data availability) relevant to environmental impacts

• New capabilities achieved for EO in last 20-30 years – entirely new forms of data, better data (accuracy, coverage, etc.) – relevant to environmental impacts

• New approaches for EO data use developed in last 20-30 years (e.g. warning systems, policy design) – relevant to environmental impacts

Ideally the data will be delivered at two levels of detail (subject to data availability) – global and European.

12.2.2 Case studies of environmental benefits

Case studies would focus on areas where space is believed to have led to improvements in environmental parameters. These might have arisen from space investments with explicit environmental objectives (i.e. Earth observation) or from unintended positive environmental impacts of downstream applications of other space investments whose primary aim is economic or social benefits such as reduced greenhouse gas emissions through improved logistics using SatNav (whose primary goal is reduced costs) or telemedicine (whose primary goal is improved quality of life).

Data collection will entail:

• Desk research /literature review to develop chain of causality from space investment to environmental benefit

• Primary data collection: semi-structured interviews with experts in the field to verify the causality; provide estimates of the benefits achieved in specific cases; develop an understanding of the extent and criticality of the space inputs and the alternatives (if any) to the space investments. The experts will include people/businesses along the value-chain (e.g. downstream equipment or service providers as well as end-users) and technical/sector experts who can provide a broader overview of the specific examples being studied



During the three-day workshop the FeliX model will be modified and run based on the scenarios developed with the experts and the input data provided. The output would then be reviewed by the experts and the model modified, as necessary, and re-run.

36 http://www.geo-bene.eu/?q=node/2066. The FeliX model is managed by the International Institute for Applied Systems Analysis (IIASA)


The outputs of the FeliX model simulation take the form of graphs over time or accumulated values over time periods for each specified variable of the model. Most of the outputs constitute non-financial measures37 such as levels of CO2 (e.g. reductions in CO2 levels or reductions in the rate of CO2 emissions), biodiversity (e.g. mean species abundance) and ecosystem measures (e.g. access to water, levels of desertification/deforestation avoided).


The case studies will describe in detail how the environmental benefit has occurred and quantify the benefit on a European and/or international level.

A detailed analysis of the link between space investments and impact will be presented which will enable a better understanding of the extent and criticality of the contribution of space to the impact category and the alternative scenario if the space investments had not been made. As, in many cases, the contribution of space is through the provision of data and information (as opposed as direct action to change behaviours or mitigate or remedy environmental harm), the case studies will contribute to debates about the value of information in decision-making processes.

The case studies will present quantitative data on the impacts attained in the specific examples and the proportion of the benefits attributable to space. Where possible, and where suitable secondary data exists, the quantitative data will be extrapolated to develop estimates of the impacts on a larger scale.

12.4 Scope


The macro-model is wide in scope and will provide estimates of benefits at a global level.

12.4.2 Case studies

The case studies are narrower in focus and while benefits will be estimated at European and international levels they will only apply to the specific benefit studied.

12.5 Implementation


The FeliX model can be used in the near-term with a small degree of modification to meet ESA’s needs. This relatively short study would provide an order of magnitude estimation of environmental impact achieved from space investments to date. This would involve bringing together experts on space-based Earth observation and Earth observation users to develop appropriate inputs for the FeliX model and to tailor any elements of the model’s structure where necessary. The process would entail:

• 5-10 days preparation by the FeliX model team

• A 3 day workshop with the experts to identify inputs and define the with and without Earth observation scenarios, managed and run by the FeliX model team

• Tailoring and running the model

• Review of model outputs with experts, and iteration of the model


37 Economic values can be assigned to some environmental parameters (such as the value of a tonne of carbon – although various different approaches to its valuation exist) and therefore a financial measure can be calculated if desired.


• 25-30 person days an elapsed time of three to four weeks


The development of an individual case study entails:

• The selection of a key investment/benefit area for the study

• Desk research and literature review to develop a description of the chain of causality between investments and benefits. Identification of precise role of the space investments

• Programme of interviews with experts and beneficiaries

• Data analysis and extrapolation to European and /or international scales

• Development of a detailed written case study

The level of resources for each case study is estimated to be:

• 30-40 person days over an elapsed time of four to six weeks

The data required will be collected for each case study and for the FeliX model as required from both secondary and primary sources. Where data does not exist estimates will be made to fill gaps.

In terms of robustness, the FeliX model has been calibrated with long time series data sets and sensitivity tested. Any modifications would also be sensitivity tested. However any tool that models complex inter-relationships of actors, resources and economic, social and environmental processes can only provide an estimates of its output parameters, and often only at the level of an order of magnitude estimate.

For the case studies, the robustness is dependent on the level of resources (in time and money) available to the study.


The link between space investments and actual (positive) change in the environmental parameters is diffuse and complex. Space-derived data play a role (along with other non-space data sources) in decisions of policy-makers that aims to instigate a slow process of behavioural change in society. While this is an intended benefit of space investments, other services that make use of space-infrastructure can create environmental benefits as an unintended by-product. Therefore identifying causes and effects and developing robust quantitative assessments is non-trivial and particularly challenging.

The combination of modelling with case studies approaches the problem from two different angles (top-down and bottom-up) to provide an order of magnitude assessment at the macro level and detailed quantitative and qualitative assessments at the micro level. The case studies also provide a more important tool for increasing understanding of the links between space investments and impacts, learning which can be used to improve the macro-model.

The only ‘fallback’ methodology for this impact category would be to rely on ad hoc case studies created elsewhere that cover the impact. However at present there are very few, if any, case studies that meet the need directly and this might continue to be the case in the future. For example, the most noteworthy source of case studies, are the Framework 6 & 7 GMES focused projects (GEOBENE and EuroGEOSS) but these do not disaggregate space and terrestrial inputs and address projected impacts rather than realised impacts. Therefore such a fallback might result in no macro-level assessment and no, or very limited, data and assessments at a micro-level.



In the longer-term, the FeliX model could be developed to more specifically match ESA’s requirements. This would involve a significant amount of work to develop the sub-systems within FeliX to better model the past (and forthcoming) capabilities provided by space-based Earth observation and, possibly, to include the environmental effects of space investments in satellite communication and navigation. The improved model could then be deployed to provide a more accurate assessment of the impacts to date followed by deployment on a regular basis (e.g. every two years) to capture the additional impacts resulting from the on-going improved capabilities such as space assets of GMES.

This would be a major undertaking and would entail:

• A 12-month project comprising a number of in-depth studies to understand the chain of causality in specific application areas between space investments and environmental (and social) impacts. These would build on the knowledge gained during the initial development of FeliX whose original objective was to assess the ex ante impacts of GEOSS (covering both space and non-space based assets)

The level of resources for the 12 month study would be:

• 3 to 4 researchers full-time for 12 months


SOCIAL IMPACTS

13. Introduction

13.1 Definitions

Investments in space generate a range of social effects including both those that are intended such as advancing scientific understanding or solving (or contributing to) social concerns such as civil protection and defence, as well as effects that are more indirect, and that may be intended or unintended to different degrees, such as international prestige and influence, inspiring the public and encouraging young people to study science and engineering. As a result social impacts are highly varied, with different effects in terms of who they affect (individuals, nations etc.) and what they affect (the knowledge stock, human health/lives, international prestige) and, like the environmental impacts, the scale of the contribution of space investments to what are much larger concerns.

We have identified and grouped six social impacts into six categories (defined in Figure 17) however it should be noted that the list is not exhaustive:

• Advances in understanding

• Strategic impact

• Space for education

• Defence

• Civil security and protection

• Externalities

Figure 17 Definition of social impact categories


Advances in understanding

Contributions to the stock of human knowledge – in particular to our understanding of our planet, the solar system and universe.

• Volume and international standing of European space research outputs, based on bibliometric indicators such as citation scores

• Qualitative accounts of key scientific achievements and contributions to the status of knowledge for discrete bodies of space research



Strategic impact Geopolitics - fostering positive international relations and enhancing international prestige and influence – in the form of: • International cooperation – closer ties

between countries through space-related collaborations

• Cohesion – closer ties within Europe through space-related collaboration

• International prestige and leadership– due to excellence in space science /engineering and using space to support development goals

Non-dependence – ownership and self-reliance in space systems, technologies, data and space-derived services., leading to: • Autonomy – freedom to design, implement

and use space systems to meet Europe’s needs

• Constant access to necessary data/information provides diplomatic security and enables strategic planning

• Authority – in international negotiations through access to own data sources plus ability to make informed decisions through access to own independent and high quality data

Geopolitics: • Main output is qualitative: the

position of Europe with respect to other countries in terms of its geopolitical influence as demonstrated by international space agreements.

• Some quantitative indicators that define position and importance (e.g. centrality, betweenness) within the network (as compared to other countries)

Non-dependence: • Number of vulnerable technologies

and change over time

• Qualitative: describing the role of public investments in transforming vulnerable technologies to ‘non-dependent’ status

Space for education

Inspiring young people to study science, technology, engineering and mathematics (STEM) subjects and pursue careers in science and technology.

Percentage of current scientists and engineers whose career choices were strongly influenced by space.

Civil security and protection

Protecting citizens from natural and man-made disasters and situations, through, for example: • Improving disaster prediction and crisis

management • Border surveillance for civil purposes • Emergency communications backup

Number of lives saved / not harmed.

Defence Contributions to the protection of citizens though use of space systems, including capabilities in: • Military communications • Border surveillance • Navigation • Intelligence (espionage) • Protecting space assets

Qualitative assessment of extent of reliance on space technologies by the military.

Externalities ‘Free’ benefits as results of space investments/ activities, such as: • European identity

• Cultural awareness and access

• Digital inclusion

• Communicating from remote locations

Financial value of externalities in terms of willingness-to-pay.

13.2 Overview of methodologies recommended

The social impacts are highly varied and therefore no one assessment method or metric is applicable to all social impacts. Furthermore most impacts are rather intangible and therefore the assessment methods tend to be qualitative in nature.

For each impact a number of methods were identified and reviewed. In some cases these methods had been previously applied in the context of space investments but for others this was not the case. Unlike for economic impacts where a number of established methodologies exist, most of the methods reviewed were non-standard;


they were designed for a single specific purpose and used as one-off implementations rather than established tried and tested methodologies. Therefore the methodological recommendations below are different for each social impact category and are somewhat experimental in nature. The first implementation of any method would be a test of the suitability of the method in terms of both the practicalities and cost of implementation and the usefulness of the outputs. The resulting assessments across the set of social impacts would be a combination of highly particular quantitative indicators and qualitative assessments.

Figure 18 Recommended methodologies: social impacts

Impact category Recommended methodology Fall-back

Advances in understanding

Bibliometric and citation analyses: • Profile the volume and international

standing of European space research outputs, using bibliometrics

• Trace the influence of European space research on other scientific disciplines, using bibliometric citations

• Discipline level reviews

• Identify and describe the scientific achievements and contributions to the status of knowledge for discrete bodies of space research, using qualitative research methods to prepare monographs, edited volumes of essays

• Bibliometrics with much narrower disciplinary focus

• Rely on space journals to conduct disciplinary reviews

Strategic impact For geopolitics: • Network analysis based on UN database of

international space treaties

For non-dependence: • Analysis of secondary data collected in the

regular ESA, EDA, EC Joint Task Force • Plus case studies of specific technologies

that have been transformed by public investments from ‘dependent’ to ‘non-dependent’


Space for education

Survey /poll of current scientists and engineers to assess degree of influence of space on career choices.


Civil security and protection

Mixed methods - a combination of a micro and macro approaches: • Detailed case studies of identified benefits

(micro level) • Application of the FeliX model to space

investments (macro level)

There are no real alternatives based on existing methods and existing data as previous studies: • Are ex-ante assessments

• Cover different geographic regions • Suffer problems of attributing

impacts to space investments

Defence Survey methodology to collect user assessments of criticality of space to military capabilities.


Externalities Survey methodology to assess willingness-to-pay for specific externalities.



14. Advances in Understanding

14.1 Introduction

This chapter outlines a methodology for detailing the impacts of public funding of space research on advances in understanding.

Historically, a substantial proportion of total public investment in space has been approved in order to carry out space research, important science that would be impossible using terrestrial solutions, or at least very much less powerful. The sums involved amount to billions of Euros each year, and the resulting advances in understanding enrich our lives and change our outlook on the world we inhabit.

ESA was founded as a scientific organisation, and the ESA Convention underlines the centrality of European cooperation for scientific purposes. Space research fits the arguments of science as a public good, where such fundamental research is beyond the reach (affordability, appropriable benefits) of private individuals or even large businesses. Investments in space research generate several types of benefits:

• Space agencies procure novel technologies and systems in order to fly scientific missions, and those breakthroughs may find wider application – through knowledge spillovers – in new products and services

• Research infrastructure in space and data from space advance understanding of the world and the wider universe

In this chapter of the report, we focus on the second of these two important social benefits of space.

14.2 Overall methodology and approach

The overall approach proposes combining science metrics and historical analysis to provide a periodical count of research outputs on the one hand along with a more qualitative and insightful account of the influence and accomplishments of space research on the other.

Specifically, we propose ESA look to implement two rolling impact assessment projects related to space research:

• Bibliometric and citation analyses

− Profile the volume and international standing of European space research outputs, using bibliometrics

− Trace the influence of European space research on other scientific disciplines, using bibliometric citations

• Discipline level reviews

− Identify and describe the scientific achievements and contributions to the status of knowledge for discrete bodies of space research, using qualitative research methods to prepare monographs, edited volumes of essays

Before we turn to our approach it is worth taking a moment to think about what we mean by space research. The term tends to be used as the collective noun for all types of research undertaken using data from or scientific equipment in space, whether that is satellites orbiting the earth that provide measurements of atmospheric chemistry or deep space probes sending back detailed images of an object in a distant planetary system or microgravity research on the International Space Station.


The Committee on Space Research (COSPAR), a Scientific Committee of the International Council for Science (ICSU), has organised space research within nine discrete fields of science (each with its own sub-committee), which are:38

• Earth observations, using remote sensing techniques to interpret optical and radar data from Earth observation satellites

• Geodesy, using gravitational perturbations of satellite orbits

• Atmospheric sciences, aeronomy using satellites, sounding rockets and high-altitude balloons

• Space physics, the in-situ study of space plasmas, e.g. aurorae, the ionosphere, the magnetosphere and space weather

• Planetology, using space probes to study objects in the planetary system

• Astronomy, using space telescopes and detectors that are not limited by looking through the atmosphere

• Materials sciences, taking advantage of the micro-g environment on orbital platforms

• Life sciences, including human physiology, using the space radiation environment and weightlessness

• Physics, using space as a laboratory for studies in fundamental physics

The term space research intersects with, but is not the same as, space science.39


14.3.1 Bibliometrics and citation analyses

In order to run the kinds of bibliometrics and citation analyses needed to profile space research, the bibliometrician would need to first construct a space research database.

There are a number of small databases one might build upon, however given the uncertainty with regard to their coverage and concordance (and terms of access to the meta data), this would be a costly and challenging endeavour in itself. The scope of space research is also rather particular and heterogeneous and as such it does not fit well with the subject classifications used by either of the major publishing groups that maintain the two leading international bibliometrics databases.

The bibliometric databases maintained by Thomson Reuters (the Science Citation Index within the larger set of Web of Science [WOS] databases) and Elsevier’s equivalent database, SCOPUS, are both comprehensive and excellent resources. These two publishers record and index meta data on tens of millions of peer-reviewed articles published in thousands of journals covering all areas of scientific endeavour, with bibliographic data stretching back to 1900 in the case of WOS and 30 years for SCOPUS. Both databases cover most if not all subjects within the field of space research, from atmospheric chemistry to materials science. They are however quite costly to access and technically demanding to use, and as such the use of these data for

38 Each of these nine subjects is covered by the international journal, Advances in Space Research, The Official Journal of the Committee on Space Research (COSPAR), a Scientific Committee of the International Council for Science (ICSU)

39 The word space in the term ‘space science’ refers to the research subject, rather than the research tool or infrastructures, as is the case with space research. In thematic terms it is therefore narrower than space research, which encompasses a range of earth-bound topics. Nevertheless, it is a broad field of scientific enquiry that involves the study of all aspects of the universe outside of the Earth’s atmosphere, whether that is astronomy (study of bodies in space) or astrophysics (studies of the physics / processes governing the universe; theories of its origins). Space science comprises empirical and theoretical study, and is pursued both from the earth (e.g. using earth-based telescopes) and from space.


research evaluation purposes tends to be something of a specialised activity carried out by a few tens of organisations across Europe.

In practice, this means the bibliometricians will need to make a space research database from scratch. They will need to devise multiple key word search strategies to interrogate the global content of one or other of the international databases in order to generate a long list of candidate publications. It would be possible to cross-reference this with other databases to get a sense of the extent of the WOS or SCOPUS coverage of space research outputs. The search period should go back at least 20 years to ensure a good cross-section of historical reports and citations. The gestation period for publishing and citation windows may be rather longer for space research, given the scale and duration of the accompanying scientific missions.

Those long lists will then need to be screened manually by domain specialists scanning titles and abstracts in order to rule them in or out of the ‘space-research database.’ Some experimentation and sensitivity analysis would need to be done, to determine the appropriate balance between a semi-automated criteria based process and expert judgement. The workload, elapsed time and cost will rise dramatically as one moves toward a more expert-based approach and away from hard search criteria. In any event, the resultant long list will need to be screened by a panel of experts and it perhaps makes sense to nominate one expert for each of the nine sub-fields defined by the COSPAR space research classification system.

Creating the original database would be the most challenging part of the exercise, and once established the bibliometricians would be able to run the bibliometric and citation analyses quite quickly.

14.3.2 Discipline level reviews

While we found various papers and books that elaborate on space research’s contributions to scientific and public understanding,40 they are essentially one-off studies. These qualitative reviews are not part of any series of publications that treat the subject consistently and add up over time – through a rolling programme – to give an overall view of the contributions of space research. Their scope and approach is nearly always unique, and non-additive.

The US National Academies report on the scientific achievements of Earth observation41 is an interesting example of a very relevant research assessment exercise, albeit it has been produced just once and is not a periodical. Moreover, it has something of a US flavour, naturally and reasonably reflecting the contributors and publisher’s experiences. It does however suggest an approach that might be replicated by other national or international bodies, by appointing an editorial board to write a collected works, inviting eminent scientists to write about the evolution of their sub-field and its contribution to the status of knowledge.

The COSPAR backed international journal, Advances in Space Research, also publishes special editions from time to time showcasing the contributions of a particular field to the status of knowledge. The emphasis is on academic impact however, some of the papers have non-academic audiences in mind. It hints at the possibility of a more formal series of discipline-level reviews.

We recommend ESA extend its special publication series to provide a platform for a rolling programme of discipline-level reviews, whereby two or three reviews might be

40 For example, Toward a global space exploration program: A stepping stone approach, Pascale Ehrenfreund et al, Advances in Space Research, Volume 49, Issue 1, 1 January 2012, Pages 2-48. Or Mars Express: The Scientific Investigations (15 Jun 2009), a 280-page ESA Special Publication SP-1291

41 Earth Observations From Space: the First 50 Years Of Scientific Achievements, Committee on Scientific Accomplishments of Earth Observations from Space, Board on Atmospheric Sciences and Climate. Division on Earth and Life Studies, National Research Council of The National Academies, The National Academies Press, Washington, D.C. (2008)


underway at any point in time running over one or two years and involving a small secretariat and a panel of eminent international researchers who would together prepare a compendium of complementary and contrasting essays. Ideally, each edited book should also benefit from some editorial input by leading industrialists and a lay member, to keep a sharp focus on meaningful breakthroughs and wider benefits and the added value of European public funds.

ESA might also consider supporting one or other space journals to develop a more systematic approach to publishing research syntheses and other reviews, which would provide feedstock for its special publications.

The rolling programme of chapters produced by the community’s éminence grise might be complemented by a more open approach to recording scientific benefits, e.g. simply running a biennial competition calling for essays, poems, videos that manage to convey the wonder and utility of space research.

14.4 Data analysis and interpretation

14.4.1 Bibliometrics and citation analyses

For the bibliometric analyses, we recommend counting the number of space research papers published annually in ISI-indexed journals and conference proceedings where at least one of the authors has a European address. This kind of output count is typically based on five-year blocks, rather than single year figures, to smooth out natural volatility in research output. This may be rather more important in a smaller field like space research, with perhaps one or two thousand new papers published globally each year. To aid interpretation, it may help to take the analyses back at least 20 years in the first iteration of the proposed methodology, to provide an historical time series and a robust reference for subsequent iterations. Using the author address as a filter also means one can quickly compute Europe’s share in world output – using ISI indexed papers – and how that is changing with time.

The proposed peer review would permit the count and trend analysis of space research papers to be reconciled with the nine COSPAR space research fields, at least for the several thousands of (ISI) space research papers with a European author.

The analyses could be developed further using the ISI subject classification as the basis for gauging the average quality of all space research papers in a particular field as compared with all papers globally in the field. In essence, the bibliometric analysis would use ISI citation records to establish the citation scores for every paper in the space-research database and would then normalise those scores using the average citation rate for all papers published in the same field and journals in the same year. This can be done for journals (mean Journal Citation Score [JCSm]) or for the field (mean Field Citation Score [FCSm]). The ambition is to achieve a score or ratio of better than 1.0, showing that space research is more widely cited – so more widely regarded and influential – than an average publication in the selected sub-field. It would no doubt take several iterations to fully understand the most suitable indicators and the implications, as there will no doubt be as yet unidentified differences between the space research and other outputs in similar disciplinary fields.42 The use of five-year blocks and normalised references should reduce problems with differences across fields in terms of publication behaviour and impact windows (timing). Using citation analyses would also permit one to identify perhaps 100 leading researchers and to use their personal publication record as a means by which to analyse the connections between space research and other fields (e.g. social network analysis).

42 For example, space science missions are large-scale, long-run projects with relatively discrete communities and the number of publications and the rate at which they garner citations may be very different to academics working with terrestrial subjects in what is ostensible the same discipline from the point of view of the bibliometrician.


It would also be possible to construct a productivity ratio of sorts, using the aggregate numbers of papers published every 5-years factored by an estimate for total European expenditure on space research in the equivalent 5-year block. Euroconsult’s report, Profiles-of-government-space-programs,’ contains national and agency specific expenditure data on science budgets. However, the ratio may be somewhat disappointing for the lay reader with numbers an order of magnitude lower than one might expect to find for all research (which on average has dramatically lower infrastructure costs).

Lastly, we recommend ESA invite its contractor to analyse the subject and geographical distributions of the authors who are citing the space research papers in an endeavour to identify patterns in intellectual flows. One might also look at the impact scores for the papers citing space research with a view to judging the extent to which these are above average works (on this measure).


The programme of qualitative research would invite authors to describe the evolution of their particular field during the past 20-30 years picking out the critical scientific achievements or milestones on the one hand and notable individual or institutional contributions on the other. These essays should also elaborate on the importance of public programmes to the rate and direction of progress. Moreover, each essay should also say more on any notable social or economic impacts that have arisen and were dependent in some part upon those publicly-financed research breakthroughs. Lastly, it would be interesting to know what the authors’ see as being the most urgent or exciting research questions for the following 10 years.

14.5 Scope of the results

14.5.1 Bibliometrics

The bibliometric analyses can be organised such that they are quite comprehensive in scope, covering most if not all sub-fields and all countries. There are certain limitations, inasmuch as the reliance on the Thomson Reuters ISI Citation Indices (Web of Science) emphasises English-language journal articles and will not include some proportion of total space research output. The size of the missing data is unclear, however a recent journal article written by authors at Leiden University and 4Con Space suggests it may be on the order of 30-40%.43 At least, their calibration work found around 2,000 of 4,000 separately identified space research papers (Inspec, Pubmed, NASA, ESA) published in the period 1985-2004 were also recorded in the ISI database. Their keyword search revealed an additional 1,500 space-research papers for the period in the ISI indexed journals, which were not captured in the other four sources. There was also an indication that the overlap and coverage of ISI had improved, as the publisher added to its journal set and publication types. On balance, we conclude that capturing 60%+ of the community’s written output is a sufficient basis for following trends in the volume and mix of research output. With several thousand articles and tens of thousands of citations, there is also a sufficient body of material to judge the international standing (quality / impact) of this work.


The scope of the discipline-level reviews is contingent on the scale or ambition of the underlying programme of qualitative research. Were ESA to launch two or three major reviews for each biennial reporting cycle, the entire field could be fully

43 Calibration of bibliometric indicators in space exploration research: a comparison of citation impact measurement of the space and ground-based life and physical sciences, A.J. Nederhof, T.N. Van Leeuwen and P. Clancy, Research Evaluation 21 (2012) pp 79-85


addressed within a 10-year programme. One would no doubt wish to look at the success of the review process from time-to-time, however it is at least conceivable that the 10-year programme would simply repeat.

As noted above, the individual reviews should cover a reasonably long time period – 20+ years – in order to ensure they encompass several scientific breakthroughs and notable social or economic effects. It is also conceivable the essays would include a forward look too, to complement the retrospective impact assessment.

14.6 Implementation

14.6.1 Bibliometrics

The proposed bibliometric analyses have been carried out on several occasions already. These studies have been carried out at different times and with a reduced scope to that envisaged here however, and while they do not in themselves constitute the answer to our question, they do at least point to a research process that is tractable albeit rather involved.

There are clear limitations with respect to the availability of relevant data on space research authors and publications. The numerous international and national agencies that fund space research have something of a mixed record when it comes to systematically and consistently recording bibliographic information for their space research outputs. There is no integrated bibliographic database or repository, and no obvious or practical solution by which one might be constructed retrospectively.

The absence of a single list of researchers or research publications complicates matters and given there is a poor alignment between space research (i.e. the COSPAR definition) and the subject classifications used by either WOS or SCOPUS, one cannot simply decant bibliometric data from a sub-set of pre-defined journals.

In practice, this means the bibliometricians will need to make a space research database from scratch.

Creating and validating the space-research database could easily take a year and cost several hundred thousand Euros. The total cost for constructing the database, running the related bibliometric and citation analyses might require a budget close to €0.5M and take two years to report. Subsequent iterations could be carried out for rather less than that, perhaps 50% of the cost of the first iteration. Once created, the database can be re-used for many other purposes and perhaps more importantly might provide the basis for improving future record keeping among relevant space agencies and research councils. Moreover, the choice of application and database structure should permit the inventory to be refined and extended over time.

In the absence of further data collection, the bibliometric analyses would be greatly reduced in scope and may be too narrow to justify inclusion in the overarching evaluation methodology.

While recent bibliometric studies have produced some relevant statistics, they are far too limited for our purpose here and are much more relevant as methodological references. In our judgement, desk research – meta analysis – using these past studies is not helpful.

The only possible fall back option would be to focus the analysis on the one or two sub-fields where the ISI citation index contains a high proportion of space-research papers. There is a direct cross over between COSPAR and the Web of Science for earth observation and remote sensing, where there is a reasonably extensive set of high-quality remote sensing journals. It may be possible to arrive at a reasonably good list


of journals for one or two other space research subjects, from astronomy44 to space physics, however the great majority of relevant authors and publications are likely to be found diffused through the wider ISI journal set. On balance, while such an exercise might only cost one tenth of the proposed approach, we believe it would amount to poor value for money.


The overall approach would involve the creation of a small standing committee to oversee the rolling programme of reviews, the first job for which would be to devise a review programme, applying a standard format and process to research and write on key intellectual developments and social or economic outcomes across the spectrum of space research, choosing a unit of analysis (e.g. COSPAR fields) or scientific missions.

Having agreed a programme and a modus operandi, the ESA secretariat would be in a position to constitute a working group to write the first edited volume. It may make sense to run with two working groups, so there is some opportunity for experimentation and accelerated learning. There is also a need to move through the programme in a timely manner.

The costs of each review will depend on the scope of the review and on what the community will bear in terms of financial remuneration, but is unlikely to amount to very much less than €200K for each, and not including ESA staff costs:

• A small ESA team to provide a secretariat and coordinate each review. This may require 50 person days

• A chairperson, to lead and challenge the group as well as 5-10 eminent individuals willing to lead on particular topics and draft essays and chapters. Their out-of-pocket expenses would need to be covered as would the cost of various working group meetings, and panellists may need to be paid for their time. An honorarium of €10K should be sufficient for individual members, the chair may require a higher fee to reflect his or her very much greater responsibility and commitment

• A series of accompanying analytical studies, reporting on investment levels, key institutions / centres, bibliometrics and so on. Again, the cost will depend on very many factors, but no doubt substantial support could be provided within a €100K envelope

Without this new process to generate relevant material and data, the proposed discipline-level reviews could not obviously form part of the planned evaluation methodology. While there is a body of literature (historical analyses) elaborating the contribution of space research to our understanding of the world, the studies are rather bespoke in form and content and do not reflect any pre-designed programme. They do not provide a platform for ESA to begin to digest and signpost impact assessments. As a fall back, it is just conceivable that one or other space research journals would respond to the challenge to begin to call for and publish a more systematic and comprehensive series of scientific reviews.

44 There are several other fields where space research might be expected to be very prominent (e.g. astronomy and astrophysics) however there is not obvious means by which to distinguish papers based on terrestrial telescopes for example as compared with those papers that are primarily reporting findings based on data from space telescopes or probes (in many cases, papers will use more than one source).


15. Strategic Impact

15.1 Introduction

Having an advanced national space programme bestows a number of strategic advantages on individual nations and, in the case of Europe, to the continent as a whole. In terms of geopolitics it signifies technological competence (for both civil and military purposes) and economic status and confers international prestige and influence. It also increases a nation’s autonomy and authority not only in terms of space activities but also in wider areas of policy (security, environment, etc.) - having access to data and knowledge enables informed decision-making and an authoritative position in international negotiations

For assessment purposes we have divided the strategic impact into two sub-categories - geopolitics and non-dependence (as defined in Figure 17). The former includes the impact on international prestige and influence, international relations and European cohesion. The latter includes the autonomy and authority of individual nations/Europe through self-reliance in space technologies and constant access to space-derived data and services enabling autonomous policy implementation and participation in international negotiations.45

Strategic impact is, by its very nature, a complex and somewhat intangible concept not readily amenable to hard quantitative indicators. It has been traditionally assessed either by a case study methodology looking in-depth at specific examples of cooperation between specific countries or regions, or historical analyses of the role of space in policy areas such as foreign policy/diplomacy or international science and technology activities. A number of standalone studies have also addressed ‘space vulnerability’ to assess the independence. A small number of more recent studies in foreign policy and international relations have deployed a network analysis methodology that provides a mapping of the volume and strength of relationships between actors (nations, organisations, individuals) that can be used as an indicator of the relative influence, prestige and power of their position in the network.

We recommend that both methodologies be used: a network analysis for the geopolitics sub-category and case study methodology for the non-dependence benefit sub-category. The non-dependence category can also make use of existing secondary data sources.

15.2 Geopolitics: network analysis

15.2.1 Methodology

We recommend a network analysis of bi-lateral and multi-lateral international agreements, legislation and treaties relating to the space sector to illustrate, and enable an analysis of the volume and strength of relationships between individual European nations and Europe as whole with the wider international space community.

15.2.2 Data collection methods

A list of international agreements in space-related activities is available from the UN in a report format. This would form the basis of a network analysis. It contains a list of around 700 multilateral and bilateral agreements and legal documents from 1958

45 The term ‘non-dependence’ is used to mean free, unrestricted access to any required space technology, including access from other space-faring nations with which a country/Europe has good international relations and therefore ‘unrestricted’ access. By contrast, ‘independence’ would refer to national or European access to the entire set of space technologies. Non-dependence is the standard definition used by the EC-ESA-ESD Joint Task Force.


(when the UN Ad Hoc Committee on the Peaceful Uses of Outer Space was established) to 1999.

Desk research would be required to: (i) identify the signatories of the multilateral agreements (bilateral agreements typically include the countries in their titles); (ii) define and apply criteria as to which agreements are appropriate for the analysis; and (iii) define a process to deal with changes to nation states (e.g. Soviet Union, Russia and the former Soviet republics).

A database of connections would be compiled from the dataset as input to the network analysis.

15.2.3 Data analysis and interpretation criteria

The network analysis methodology provides an illustration of the network of international connections in terms of the number and strength of the connections between countries. It also enables a quantitative analysis of the ‘strength of ties’ between nodes (countries or geographical regions in this case) and the centrality of specific nodes. The strength of a tie is assessed in terms of both the magnitude and frequency of interactions between two nodes. Centrality is a measure of importance or influence of specific nodes in the network and can be defined and analysed in a number of ways including: degree – the node with the highest number of direct connections; betweenness – the extent to which a node act as a bridge to other node); closeness - a measure of both direct and indirect connections.

The analysis enables the key nodes to be identified – in terms of the most active and the most central – with these two measures implying a high degree of power and influence. While it would be expected that the nations that invest the most in space will be the most active in terms of number of connections, the various concepts of centrality might reveal some interesting patterns. The analysis would need to be conducted for both ESA as a single entity and for European nations individually as different patterns may emerge.

15.2.4 Scope

The scope of the analysis would be international and cover the period 1958 to 1999. The analysis could be sub-divided into different time periods (e.g. decades), as this would reveal changing patterns with regard to investment and political influence – such as the creation of ESA, the demise of the Soviet Union.

15.2.5 Implementation

Implementation entails:

• Accessing UN documents and related databases or recreating same46

• Identifying criteria for inclusion of agreements in the analysis

• Building a database of connections - this is relatively straightforward for the bilateral agreements as the signatories are named in agreement titles. Desk research would be required to identify the signatories to the multilateral agreements

• Running network analysis, visualise output, conduct quantitative analysis of network features (strength of ties, centrality)

The level of resource for the network analysis is estimated to be:

• 10-15 person days over an elapsed time of two weeks

46 UNITED NATIONS. 1999. International Agreements and Other Available Legal Documents Relevant to Space-Related Activities. Geneva: United Nations. [www.unoosa.org/pdf/spacelaw/intlagree.pdf]


15.2.5.1 Available data

The currently available data covers the period 1958 to 1999. This would be sufficient for an initial analysis but would need to updated to include the period from 2000 to the present day.

15.2.5.2 The level of effort needed to gather missing data

The UN Office for Outer Space Affairs would appear to maintain lists of space-related treaties and agreements. A simple update in the same format as the 1999 report is not publicly available but it would seem that they hold the relevant information. However the extent and format of the data is not visible in the public domain and therefore estimating the additional resources required is problematic. The estimate below assumes that the required information on treaties between 2000 and 2011 (or thereabouts) is collected by the UN, but that a degree of additional work would be necessary to collate and standardise the format before the network analysis could be undertaken.

The level of resource to extend the network analysis is estimated to be:

• 30-40 person days over an elapsed time of six weeks

15.2.5.3 Relevance of the methodology

The methodology provides an analysis of the prestige and importance of Europe in international activities linked to space – as this is where the direct influence of space-faring nations will lie. While this might at first seem a little circular as, intuitively, one would expect to find that those that invest the most will be the most influential, it may reveal important patterns of changing influence over time and reveal the difference in the effects of activity at European and national levels.

It would be expected that this influence would extend to other closely related domains such as defence, science and technology, and the analysis could be expanded (see below).

There would appear to be no fallback methodology for this impact category as there are no readily available alternative sources of relevant data and information.

15.2.6 Future development options

Future options include extending the analysis to other domains where international treaties are important and where space is known to play a role. This might include the role of space investments in the environmental domain for example, and it might be possible to extend the survey methodology in Section 11 (impact on environmental policy-making) to collect data on international environmental agreements, treaties and policies.

15.3 Non-dependence: secondary data and case studies

15.3.1 Methodology

Non-dependence, i.e. self-reliance in the design, build and operation of space infrastructure is underpinned by access to the relevant technologies and skills. We recommend a methodology that combines:

• Desk research using existing data collected to track the status of critical technologies for which Europe is currently not non-dependent, and

• Case studies to demonstrate the role of public investment to address access to specific critical technologies


15.3.2 Data collection methods

A Joint Task Force (JTF) composed of ESA, the European Defence Agency and the European Commission (established in 2002) identified and defined a catalogue of critical space technologies, the so-called list of ‘urgent activities for critical space technologies for European non-dependence’. The catalogue undergoes a formal review process by the JTF each year and an official update every two years. The update includes a survey of industry to identify the status of each technology. This provides a count of the critical technologies and their status with respect to a list of undesired “dependence situations” (such as technology / product blocked for certain end users, higher costs and delays, lack of information, in particular technical and quality information).

A case study (or series of case studies) would focus on specific critical technologies for which public investments have changed its ‘dependence’ status. A series of interviews with the JTF, space agency staff and industry that have received public funds would collect qualitative (and quantitative if relevant) data on the process of transforming technologies from ‘dependent’ to ‘non-dependent’.

15.3.3 Data analysis and interpretation criteria

The JTF survey data provides a count of the number of technologies in the catalogue considered to be ‘dependent’ every two years. A time series presentation of the number of technologies considered to be of immediate concern (level 3.3 in Figure 19) can be presented to illustrate changes over time. A review of changes in the overall catalogue would also show how technologies move into or out of the catalogue over time.

Interviews with JTF members would enable an estimate of the proportion of ‘vulnerable’ technologies of all space technologies to be determined.

Figure 19 Example of output from JTF industry survey

ESA47

The case studies would develop a descriptive account of the situation before and after public investments, describing where and how technologies were previously sourced and the particular dependency issues and situation as result of public intervention – plus an account of the role of public space investments in the process of transforming technology from dependent to non-dependent status. Quantitative data, where

47 www.gppq.mctes.pt/fp7space-gio-symposium/_docs/26_1100_UdoBecker.pdf


available (such as percentage of supply now non-dependent vs dependent) would also be presented.

15.3.4 Scope

The scope of the secondary survey data is broad, covering all ‘vulnerable’ technologies, from a European perspective, identified by the JTF.

Individual case studies are narrow but a portfolio of cases would be built up over time.

There would appear to be no fallback approach for this impact category as no other sources of relevant data have been identified.

15.3.5 Implementation

Implementation would entail:

• Accessing annual survey data from JTF

• Interviews with members of JTF to discuss data and movements of technologies onto or off of the list, and to identify suitable technology for case study

• Analysis and presentation of survey data as time series

• Case study interviews

• Case study analysis and write-up

• Joint analysis of both data sets

The level of resource for the assessment analysis is estimated to be:

• Secondary data analysis: 4-5 person days

• Case study: 15-20 person days over an elapsed time of four weeks

There is the option of utilising only the secondary data and omitting the case study.


The methodology focuses on the technology aspect of the non-dependence impact as this underpins the issues of constant access (to data and services) and the authority this provides in negotiating at an international level. There are string synergies between the geopolitical and non-dependence impacts and the therefore the methodologies recommended provide a relevant, albeit partial, assessment of a complex domain.


15.3.7 Future development options

Aside from conducting case studies recurrently, there is no immediate need to develop the methodology further. However, as strategic impact is such a complex area, its assessment is particularly challenging and therefore a review of potential new methods for their assessment should be made on a regular basis.

16. Space for Education

Space is perceived as an important means to inspire and educate citizens both about the Earth and its place in space and more generally about science and technology. Where young people are concerned, the positive impact is seen in terms of space’s capacity to inspire them to study science, technology, engineering and mathematics (STEM) subjects and, ultimately, to pursue careers in science and technology.


Moreover, raising the proportion of STEM graduates or those in pursuit of scientific careers is an increasingly important public objective throughout Europe.

Academic research suggests career aspirations are often formed at quite a young age and that these directional thoughts go on to shape study choices, which in turn help to determine career options. These choices are mainly about enjoyment and aptitude, rather than precisely articulated ambitions towards particular careers and are maintained strongly throughout the 10-15 years of school and university. A number of studies have identified the period between the ages of 11 and 14 as the most crucial time for engaging and inspiring students in STEM subjects.48 Therefore educational activities focused on this age group are particularly important.

In addition to reports in the mainstream press on space activities, most space agencies make concerted efforts to engage with school children in two ways:

• Curricular space activities – space being included formally in science curricula or used informally as an educational tool by individual science teachers making use of teaching materials on ESA, NASA and other space websites. There are also several continuing professional development (CPD) schemes run through the European Space Education Resource Office (ESERO) and at national level, such as the UK’s National Space Academy. These have the shared objective of augmenting existing academic curricula to further improve students’ average performance in STEM subjects, through space

• Extracurricular space initiatives – such as exhibitions, school-trips, one-off experience events and other less formal venues (such as museums, expositions, space camps, or relevant clubs) focused on space. Examples include master-classes from the National Space Academy, activities of National Space Centres and the European Space Camp

These activities are capable of delivering one or both of the following benefits:

• Firstly, an increase in interest in science for children and young people that improves their learning outcomes and overall academic success in STEM subjects

• Secondly, and closely linked to (or can be the result of) the former, the overall increase in engineers and scientists within the population, whose career decisions have been influenced in a relevant way through space education

A small number of methodologies were identified as relevant to these impacts, with most attempting to address the first benefit. However as the second benefit incorporates the first to a large degree, we recommend a methodology that surveys scientists and engineers to better understand the influences (including space) that underpin their choice of academic study and career.

16.1 Methodology

We recommend a survey methodology directed to scientists and engineers as well as students of STEM subjects in order to assess the degree to which their study and career choices have been influenced by space.

16.2 Data collection methods and implementation

The survey would be directed at practising and potential future scientists and engineers at different points in their career (at start and end of university course, early in career, mid-career etc.) and working in different sectors. The survey would not be a longitudinal cohort study but a snapshot of individuals currently at different points in

48 IMechE. 2010. When STEM? Question of Age. Institute of Mechanical Engineers and OECD. 2006. Evolution of Student Interest in Science and Technology Studies. Paris: OECD


their careers. Potential respondents could be identified by membership of scientific and engineering professional societies (Europe-wide) and contacted via a variety of means (online, telephone etc.). As a fairly large-scale survey it might best conducted by a professional polling organisation such as Gallup or Mori. It might be conducted as a Flash Eurobarometer survey under the auspices of the European Commission who have utilised this mechanism in the past to assess public opinion and awareness of space activities.49


Data analysis would focus on two key issues:

• The proportion of scientists and engineers whose chosen study/career path has been influenced by space – analysed by a number of features such as career-stage, age, sector of employment (including industry and academia), nationality, gender

• A comparison of the strength of influence of space with other sources of influence (collected in same survey) in terms of other highly visible scientific activities plus influences such as parental guidance, specific influential teachers, aptitude etc., this would enable an estimation of the difference space has made to overall numbers of currently practicing scientists and engineers

The level of resource for the survey and analysis is estimated to be:

• First run: 90-100 person days over an elapsed time of three to four months

• Subsequent runs: 50-60 person days over an elapsed time of two to three months

16.4 Scope

Using a polling approach to data collection would result in a wide scope in terms of geographical and sector (of employment) coverage. The focus of the questions would be kept quite narrow – keeping the survey focused on the impact category i.e. the extent to which space has made a contribution to the number of currently practicing scientists and engineers.



The survey could be run at regular intervals to identify changes in the pattern of impact. Alternatively a more ambitious longitudinal cohort study could be undertaken to track the educational and career choices of a group of school-age children that participated in specific space-focused educational activities against a control group.

17. Civil Security and Protection

17.1 Introduction

Civil security includes natural and man-made events with the potential to cause harm to citizens. It excludes issues related to security secured via investments in a defence capability.

Space applications currently play a number of roles in protecting citizens from harm, particularly in the realm of predicting and managing the consequences of natural and human-induced disasters such as earthquakes, severe weather events, outbreaks of

49 European Commission, Space activities of the European Union – Summary, Flash Eurobarometer report, 272, 2009


disease and oil spills. The prediction, early-warning, mitigation and remediation of natural disasters and is an explicit objective of European investments in GMES, but other space-base systems, satnav and satcoms, also contribute to disaster remediation. GMES also has a role in monitoring other forms of activity with the potential to cause civil security issues such as illicit movement of goods across borders and large-scale political demonstrations.

The over-arching social impact of investments in GMES in particular is in terms of the reduction in: loss of life; decreases in quality of life; and the loss of property from natural and human-induced disasters. Other space investments may also contribute to this impact, such as improving healthcare in remote regions via satcom-enabled telemedicine.

17.2 Methodology

Assessing impact in this category has the same issues as assessing the positive effect on environmental parameters – the route to impact is complex and involves many actors making the attribution of impact to space investments particularly challenging. Therefore we recommend a similar methodology – comprising macro and micro approaches. The FeliX model (as recommended and described in section 10.2) was developed to assess the complete set of benefits from GMES and therefore it covers social benefits in addition to environmental benefits. Detailed case studies of specific (past) examples of space-infrastructure supporting reduced loss of life (in particular) provide a tool to demonstrate impact with real examples but also to develop a better understanding of the route by which the impact occurs and the attribution of impact to space investments.

The methodology combines:

• A comprehensive macro-level modelling methodology (the FeliX model) with

• Detailed micro-level case studies of identified environmental benefits

As the methodology is essentially the same in principle as that for the positive effects on environmental parameters category, the descriptions that follow are very similar to those in Section 12.



As described in section 12.2 the FeliX model would need some modification to focus only on space investments. Inputs required are the same as for its use in the environmental impact category – that is data on relevant space investments plus expert views to develop the scenarios required to modify the model. However the scenarios developed would be focused on the links between space investments and social impacts –which will not necessarily be the same as the linkages for environmental impacts. The required information would be collected during from experts during a three-day workshop.

In order to conduct the assessment that would be suited to ESA’s expectations the following inputs to the FeliX model would be required:

• Financial investments in space-based EO over past (20-30 years or longer – subject to data availability) - relevant to social impacts

• New capabilities achieved for EO in last 20-30 years – entirely new forms of data, better data (accuracy, coverage, etc.) – relevant to social impacts

• New approaches for EO data use developed in last 20-30 years (e.g. warning systems, policy design) – relevant to social impacts


17.3.2 Case studies of social benefits

Case studies would focus on specific examples where space has led to reduced loss of life or reduced damage to life or property either through improved prediction and early-warning or improved operations on the ground, be that disaster relief or for example improved healthcare.

Data collection will entail:

• Desk research /literature review to develop chain of causality from space investment to social benefit

• Semi-structured interviews with experts in the field to verify the causality; provide estimates of the quantifiable benefits achieved in specific cases; develop an understanding of the extent and criticality of the space inputs and the alternatives (if any) to the space investments. The experts will include people/businesses along the value-chain (e.g. downstream equipment or service providers as well as end-users) and technical/sector experts who can provide a broader over-view of the specific examples being studied

• Identification of secondary data to support extrapolation from the case study to a larger scale – such as the data on deaths from natural disasters as compiled in the Emergency Events Database (EM-DAT) coordinated by the Centre for Research on the Epidemiology of Disaster (CRED) in partnership with the World Health Organisation



During the three-day workshop the FeliX model will be modified and run based on the scenarios developed with the experts and the input data provided. The output would then be reviewed by the experts and the model modified further, as necessary, and re-run.

The outputs of the FeliX model simulation take the form of graphs over time or accumulated values over time periods for each specified variable of the model. Most of the outputs are non-financial measures50 in terms of changes to human population.


The case studies will describe in detail how the social benefit has occurred and quantify the benefit on a European and/or international level.

A detailed analysis of the link between space investments and impact will be presented which will enable a better understanding of the extent and criticality of the contribution of space to the impact category and the alternative scenario if the space investments had not been made. As in the environment impact category, in many cases, the contribution of space is through the provision of data and information (as opposed as direct action to reduce social harm), the case studies will contribute to an understanding of the value of (space) information in decision-making processes.

The case studies will present quantitative data on the impacts attained in the specific example and the proportion of the benefits attributable to space. Where possible, and where suitable secondary data exists, the quantitative data will be extrapolated to develop estimates of the impacts on a larger scale.

50 Economic values can be assigned to value human life (various approaches exist) and therefore a financial measure can be calculated if desired.


17.5 Scope


The macro-model is wide in scope and will provide estimates of benefits at a global level.

17.5.2 Case studies

The case studies are narrower in focus and while benefits will be estimated at European and international levels, they will only apply to the specific benefit studied.

17.6 Implementation


The FeliX model can be used in the near-term with some modification in order to meet ESA’s needs. This, relatively short study would provide an order of magnitude estimation of social impact achieved from space investments to date. This would involve bringing together experts on space based Earth observation and Earth observation users to develop appropriate inputs for the FeliX model and to tailor any elements of the model’s structure where necessary. The process would entail:

• 5-10 days preparation by the FeliX model team

• A 3 day workshop with the experts to identify inputs and define the with and without Earth observation scenarios, managed and run by the FeliX model team

• Tailoring and running the model

• 1 day review of model outputs with the experts. Iteration of the model with the experts


• 25-30 person days an elapsed time of three to four weeks

However there will be economies of scale in utilising FeliX for both the positive effects on environmental parameters and the civil security category simultaneously. Therefore the total resources will be reduced if both are conducted together.


The development of an individual case study entails:

• The selection of a key investment (or space capability) and benefit area for the study

• Desk research and literature review to develop a description of the chain of causality between investments and benefits. Identification of the precise role of the space investments

• Programme of interviews with experts and beneficiaries

• Data analysis and extrapolation to European and /or international scales

• Development of a detailed written case study

The level of resources for each case study is estimated to be:

• 30-40 person days over an elapsed time of four to six weeks

The data required will be collected for each case study and for the FeliX model as required from both secondary and primary sources. Where data does not exist, estimates will be made to fill gaps.


In terms of robustness the FeliX model has been calibrated with long time series data sets and sensitivity tested. Any modifications would also be sensitivity tested. However any process to model complex inter-relationships of actors, resources and economic, social and environmental processes can only provide an estimate of its output parameters, and often only at the level of an order of magnitude estimate.

For the case studies the robustness is dependent on the level of resources (in time and money) available to the study.


The link between space investments and social impact in terms of lives saved (or not damaged) is diffuse and complex. Space-derived data play a role (along with other non-space data sources) in the decisions of policy-makers that aim to prevent harm in the first place or minimise harm once events have occurred. Therefore identifying causes and effects and developing robust quantitative assessments is non-trivial and particularly challenging.

The combination of the macro-level modelling with case studies approaches the problem from two different angles (top-down and bottom-up) to provide an order of magnitude assessment at the macro level and detailed quantitative and qualitative assessments at the micro level. The case studies also provide a more important tool for increasing understanding of the links between space investments and impacts, learning which can be used to improve the macro-model.

As for the category ‘positive effects on environmental parameters,’ there is no real fallback alternative to this approach.


The big challenge for modifying the model will be to develop a closer link between the space investments and reductions in lives lost so that the lives lost can be disaggregated from more general population figures. This could form part of a wider study to develop and improve FeliX for ESA’s purposes (as described in 12.6).

18. Defence

18.1 Introduction

The defence sector is a key user of space applications making use of all three application areas: satellite communications in the form of both secure bespoke military systems and commercial systems, satellite navigation (GPS was originally designed for military purposes) and space-based imaging for surveillance and intelligence gathering. These provide defence capabilities in five distinct areas:

• Military communications – providing reliable and secure communications worldwide, in support of battlefield operations and disseminating intelligence

• Border surveillance – for monitoring borders for a range of purposes, not least geographical sovereignty but also for arms proliferation and the breach of international agreements. This is particularly important when maritime borders are concerned

• Navigation – for missile guidance as well as battlefield and logistical operations

• Intelligence (espionage) – space offers an unrestricted intelligence-gathering tool that can be used over and above a country’s sovereign territory or airspace, enabling a host of advanced intelligence capabilities for defence through surveillance, reconnaissance, target acquisition, and signal interception

• Protecting space assets - given the growing presence and strategic significance of space-based systems, further space assets are required to ensure the protection of


current ones. Furthermore space assets are best protected from space, producing an important modern consideration for defence

The use of space-infrastructure by the military brings benefits in protecting citizens from deliberate human threat, however assessing the impact of space in the defence area is problematic for a number of reasons. Firstly, unlike most impact categories there is no metric for assessing the high level impact of an effective defence capability – for example there is no ready-made way to assess the ‘sense of security’ felt by citizens as a result of defence investments. Furthermore defence, by its very nature maintains a high level of secrecy about its capabilities making it difficult to access relevant data and information. Finally, military investments in space are difficult to identify not only due to security but also due to the dual-use nature (i.e. military and civil) of the technologies, resulting in funding being channelled in some cases via the civil space agencies.

Given the absence of a suitable metric for the concept of ‘security’ we recommend an assessment of intermediate metrics in terms of the extent and criticality of the space contribution to defence capabilities, followed in the longer term with the potential to test a game theory approach to assessing the contribution of space capabilities to the deterrent aspect of advanced defence capabilities.

18.2 Methodology

A method designed to assess the extent of reliance on GPS51 can be extended to cover the wider use of space by the military. It makes use of user assessments of the extent to which different applications are impaired by the unavailability of the unpinning space systems.


Data collection would entail:

• Desk research and interviews with military experts to identify the key applications and user groups (a starting point would be the five applications listed in 18.1, although a higher level of disaggregation could be used, or application could focus on deterrent vs battlefield operations etc.)

• Primary data collection via a survey of users to collect assessments of specific application areas against a pre-defined scale (see below). The survey can also contain question about alternative solutions to meet needs


Harding used a scale to assess the extent to which different user groups would be impaired by a lack of availability of a space system along two axes: in the near-term (i.e. how it is used in practice now) and in the medium-term (how it is expected to be used in future); for a short or longer-term lack of availability (less a week or more than a week). Figure 20 provides an illustration. The scale used was quite simply defined as: annoyance, inconvenience, significant inconvenience or critical - but a more detailed scale better aligned with military usage could be developed.

The analysis provides an assessment of the extent to which specific space systems are used and relied upon by the military i.e. who relies on different capabilities and how much they rely on them. It does not provide an over-arching assessment of the extent of reliance and therefore does not provide a single value as an output. Importantly it demonstrates where critical dependence lies.

51 S. J. Harding, Study into the Impact on Capability of UK Commercial and Domestic Services Resulting from the loss of GPS Signals (QINETIQ/FST/CRMV/CR011937). QinetiQ Ltd., Radiocommunications Agency, 2001


Figure 20 A Harding-style matrix for assessing criticality

Near-term (<3 years) Medium-term (>3 years)

Application area Loss of system

< 1 week Loss of system

> 1 week Loss of system

< 1 week Loss of system

> 1 week

Military communications

Annoyance Inconvenience Annoyance Inconvenience

Border surveillance Inconvenience Inconvenience Critical (safety) Critical (safety)

Navigation … … … …

Intelligence (espionage)

Protecting space assets

Source: adapted from Harding, 2001

18.5 Scope

The scope of the method can be more or less detailed depending on the definition of application areas and user groups. The data are based on the opinions of users and therefore the greater the number of respondents the more robust the outputs.

18.6 Implementation

Implementation requires:

• Desk research and interviews with military experts to identify the key application areas (and the level of detail required) and user groups to define the scale to be used

• Identification of a method to access user groups

• A survey of users to collect assessments

• Analysis of responses


• 60-80 person days over an elapsed time of three to four months


The methodology does not directly address the space contribution to the social impact of defence (as we have said it is not, in any case, directly measureable), but it enables a demonstration of the significance of space-based systems to the delivery of defence capabilities.



Some interesting work has been done applying game theory to the defence domain in an attempt to assess the influence of specific defence capabilities in a larger geopolitical context. In particular how does the presence of a specific military capability contribute to diffusing international conflicts i.e. act as a deterrent. A process deployed by O/Neill52 used a game theory approach to calculate a Crisis

52 B. O’Neill, A Measure for Crisis Instability with an Application to Space-Based Antimissile Systems. The Journal of Conflict Resolution, 31(4), pp.631-672, 1987


Instability Index to assess military tensions (between two countries) in different contexts e.g. with /without the presence of different defence capabilities. Such an approach would be highly experimental in the context of this study. It is likely that it could only accommodate large-scale offensive or defensive space-based capabilities (rather then, say, an operational tool).

19. Externalities

In addition to the five social impact categories covered above there are a number of benefits that have not been captured in economic, environmental or social terms. These benefits accrue ‘free of charge’ as a result of economic activities in the space sector and are considered in economic terms to be ‘externalities’. A number of externalities have already been captured by other impact categories:

• From a private sector perspective knowledge spillovers are negative externalities that result in under-investment in R&D in social terms - a feature that public investment in R&D explicitly aims to address

• Unintended positive environmental impacts such as reduced emissions through improved fleet management using satellite navigation are a positive externality from space investments

Therefore this category addresses additional externalities not captured elsewhere and focuses on positive externalities only. A number of externalities have been identified but the list is by no means exhaustive. They range from those that are extensive (European identity) and quite narrow (communicating from remote areas) in terms of the number of people who benefit:

• European identity - space plays a role in enhancing and bolstering Europe’s identity, as perceived by its own citizens and those in the wider world

• Cultural awareness - growth and spread of satellite communications for television and radio broadcasting has enabled long-range content to traverse traditional borders and become accessible around the world. Over and above any consumer surplus this might provide, they have the capacity to promote cultural awareness, interest and tolerance both within and external to Europe

• Digital inclusion – along similar lines to the above, access to ICT and the Internet enables citizens to participate in the online life of local, national and international communities. The unlimited reach of satellite communications offers the potential to deliver online access to people in remote areas thus ensuring they are not ‘digitally excluded’

• Communicating from remote areas – the commercial use of satellite communications in remote regions in sectors such as oil and gas, shipping and military provides the additional benefit of enabling individuals to communicate with their families. This service holds an intrinsic social value over and above any consumer surplus

19.1 Methodology

These examples of externalities provide highly intangible benefits that are not charged for in any economic sense and are often unintended impacts of space investments. Furthermore each example is a complex concept and they are all very different in nature. However it may be possible to assess them simultaneously using a methodology based on the ‘willingness to pay’ concept. This would make use of a survey of the general public to determine estimates of what they would reasonably be wiling to pay for a given externality. There would, of course, be no word of actually paying for the externalities, as the exercise would be purely hypothetical. All the same,


the approach would enable a researcher to place an economic value on a given externality as a monetary benchmark for its overall social value.

Typically ‘willingness to pay’ studies, whether to assess consumer surplus or externalities, focus on one example and therefore attempting to assess a number of disparate externalities together would be somewhat experimental.

19.2 Data collection methods and implementation

Data would be collected from a survey of a representative sample of the general public across Europe. This would be preceded by desk research to develop an appropriate questionnaire for data collection. This task is not trivial as respondents would be asked to answer hypothetical questions about complex concepts such as ‘European identity’ and questions must also attempt to disentangle the externality from any aspects that respondents might envisage paying for (e.g. features of a product/service that might be considered to be consumer surplus). A trial of the questionnaire would be necessary. This would test the delivery method (online, telephone, face-to-face) as well as the questions. Furthermore questions need to consider if respondents are being asked to assess their willingness to pay in a context where hypothetical ‘paying’ will crowd out their current expenditures or if these would remain the same, as well as to whom the hypothetical income might be paid.


• 100 person days over an elapsed time of six to eight months


Data analysis would focus on average willingness to pay (value) for specific externalities and an extrapolation to the population. However this simple analysis might not be straightforward as the range of values might not only be very large but may also encompass ‘infinite’ values e.g. clean air might be viewed by some respondents as ‘priceless’.

The analysis (and the questionnaire) needs also to consider the counterfactual – for example, what are the cultural benefits of access to communications technologies (to deliver TV, radio, internet etc.) provided by non-satellite means.

19.4 Scope and relevance

The scope in terms of externalities is dependent on resources as each externality will require the development of a unique set of questions.

The first implementation of this method should be viewed as an experiment with further development if it proves reasonably successful and/or it is deemed a particularly important impact for ESA. The externalities in this group might be viewed as of less importance than the externalities covered in other impact categories (knowledge spillovers, positive environmental effects) and, with limited resources and no guarantee of a convincing output, it might not be considered to be a priority for assessment.



AGGREGATING THE IMPACTS

20. Bringing it All Together

20.1 Introduction

The preceding chapters have taken each type of economic and social benefit in turn and recommended a particular methodology that we judge to be both practicable and affordable. The ambition ultimately however is for each of those measurement exercises to be combined within a larger overarching assessment methodology, which is able to aggregate the spectrum of different effects, covering all public expenditure and all types of impacts. This final chapter presents our proposals for an overarching evaluation methodology.

We have taken the view, given the current state of the art in methods and data, that the overarching methodology must be a conglomerate. A mixture of quantitative and qualitative metrics will cover some but not all impact types and these will need to be presented alongside a qualitative narrative for other key achievements (e.g. geopolitical), relying on good judgement to draw conclusions from such a collage of different entities. This compromise will be necessary for the first iterations at least, while new data streams are established and their results calibrated.

In the longer term, it may be possible for ESA to sponsor the development of a much more integrated methodology and model, which would cope with the diverse range of units of measurement required to dimension the many different types of economic and social effects (e.g. money, publications, tonnes of CO2, quality adjusted life years, etc) and rather more neatly aggregate those effects in financial terms in a singular model that can feed an overall cost benefit analysis.

In developing our final proposal for an overarching methodology, we have considered three implementation options, which were to ‘do everything possible to improve the situation, do the minimum necessary to produce an overall estimate and find the best balance of the two, the third way. More specifically, these are:

• Option A: Implementation of an ‘ambitious’ and comprehensive approach, encompassing all of the most involved methodological development projects presented in each of the preceding chapters

• Option B: Implementation of a ‘light-touch’ approach, which relies on existing data and methodologies as described in the fallback approaches in each of the preceding chapters

• Option C: Implementation of a ‘middle’ approach, which combines aspects of Options A and B based on a judgement as to value for money. This entailed consideration of the extent of the measurement need (e.g. an important effect that is poorly captured by current data or methods) and feasibility (e.g. how practicable / affordable is the solution)

20.2 Implementation: Option A

Figure 21 presents Option A, a summary of our recommendations, elaborated at some length in the preceding chapters, for a series of methodological development projects that would move forward the state of the art in terms of measuring the impacts of public investments in space. For each type of impact, the table outlines our judgement as regards the best available methodology not entailing excessive cost, and also provides an estimate of the likely cost to develop that approach (dev) and to run it for the first time (run) in for example 2013. These estimates have all been translated in €000s (€K) for legibility, where the preceding sections have used a mixture of


budgets and staff days in line with the advice given by experts. Most importantly, these are first approximations and intended to give a sense of the likely order of magnitude of the cost of carrying out such work in future.

Figure 21 Recommended methodologies and indicative costs (Option A)

Impact Recommended approach Est. Cost

ECONOMIC Direct


• Universities, public research institutes and internal Agency activities • Sampling of downstream sector actors, including details of

information sources and consequences for business of non-availability of space data to better define the downstream sector

• Reconciliation of data on funding with that on recipients’ sales, using Euroconsult global statistics on public funding agencies

Dev: 100K

Run: 250K

ECONOMIC Indirect

Creation of input-output coefficients for a bespoke space sector, based on existing data supplemented by extension of current surveys to include information on volumes and sources of supplies into the space industry

Dev: 200K Run: 100K

ECONOMIC Induced

Extension of current macromodels, to incorporate a bespoke space sector (consistent with suggested developments on indirect impact)

Dev: 100K Run: 50K


• Improved identification of cases of spillovers at national and EU levels • Improved data collection to capture more data on costs and benefits • Rolling programme of in-depth case studies of known examples, with

estimation of gross and net (inclusive of opportunity costs) benefits • Use of OECD space patenting information to (a) highlight particular

spillovers for investigation (b) enable citation analysis for levels and trends in cross-fertilisation between space and other sectors

Dev: 50K Run: 250K

ECONOMIC Market Spillovers



• Inclusion of assessment of consumer and producer surpluses from new developments, as a routine component of ongoing programmatic and system level evaluation of public investments in space

Dev: 100K Run: 250K

ENVIRON-MENTAL Environmental policy-making

For impacts on policy makers and policy making • Design, test and implement a new periodical international survey of

environmental policy-makers and other actors to determine people’s perceptions of the role of space investments in (i) identification of environmental problems /issues; (ii) policy development; (iii) policy implementation

• Design and implement a rolling programme of in-depth historical ‘tracking back’ case studies that reveal the nature and extent of space contributions to specific and important environmental policies or treaties

Dev: 50K Run: 200K

ENVIRON-MENTAL Positive effects on environ-mental parameters

For impacts on environmental parameters, combine micro and macro approaches: • Detailed case studies of identified benefits (micro level)

• Application of the FeliX model to space investments (macro level)

Dev: 500K

Run: 200K


Bibliometric and citation analyses • Profile the volume and international standing of European space

research using WoS bibliometric data • Trace influence of space research on other scientific disciplines, using

bibliometric citations • Institute a rolling programme of discipline-level reviews

Dev: 500K

Run: 200K 200k per review


For geopolitics: • Network analysis based on UN database of international space treaties For non-dependence • Analysis of secondary data collected in the ESA, EDA, EC Joint Task

Dev: - Run: 200K

Dev: -


Impact Recommended approach Est. Cost

Force • Case studies of technologies that have been transformed by public

investments from ‘dependent’ to ‘non-dependent’

Run: 150K


‘Eurobarometer’ style poll of current European scientists and engineers to assess influence of space on their career choices as compared with other possibly important triggers Rolling programme of case studies to determine the cognitive and inspirational impact on young people of specific space-related educational programmes or visitor attractions and simulations

Dev: 50K Run: 200K


Mixed methods - a combination of a micro and macro approaches: • Detailed case studies of identified benefits (micro level) • Application of the FeliX model to space investments (macro level)

Case: 50K each Dev: 500K Run: 200K

SOCIAL Defence

Rolling programme of case studies to determine the functional and economic improvements realised through the use of next generation space-enabled services, including assessment of the extent to which key aspects of military capabilities are now critically dependent on space capabilities

Case: 100K each

Dev: 50K Run: 200K


Eurobarometer-style opinion survey to assess willingness-to-pay for specific externalities

Dev: 50K Run: 200K

Working bottom up, impact type by impact type, does result in a group of methodological development projects that taken together may very well entail excessive cost, even it no one project would fail that test.

If ESA were to proceed with all of the measurement projects in a first iteration of the overarching methodology, the cost would fall in the range €3M-€5M, depending upon the number of substantive case studies (e.g. market spillovers, environmental, defence, advances in understanding, etc). Perhaps as much as 50% of the cost of the first iteration would be absorbed by the cost to develop and extend various economic models and databases (input-output tables, multipliers, FeliX, space research bibliometrics). However, those development costs would not recur, giving an estimated cost per iteration of €1.5M - €2M.

20.3 Implementation: Option B

As a complement to Option A, we have developed a de minimis option of relying only on the fallback methodologies for each impact category. Figure 22 presents this fallback or light-touch approach, our Option B.

This would result in an indicative total cost of €400K-€500K, but with a significant reduction in coverage and robustness as compared with Option A. In terms of coverage the assessment would almost entirely focus on the economic impacts, excluding the environmental impacts and most of the social impacts too. These are the areas where available data and methods are weakest, and as a result this option neglects some of the most important and unique benefits of space. By definition, this option does not move forward the state of the art in assessment of the benefits of public investments in space.

Figure 22 Fallback methodologies and indicative costs (Option B)

Impact Fallback approach Est. Cost

ECONOMIC Direct

Estimates based on data from current surveys of European industry Run: 50K

ECONOMIC Indirect


Run: 30K

ECONOMIC Induced

Use of ‘rules of thumb’ or based on averages or ranges of values derived from available macroeconomic models

Run: 30K


Impact Fallback approach Est. Cost


Use of existing estimates of the importance of knowledge spillovers, assuming the space sector to be typical (in terms of spillovers) of sectors where such studies have been carried out

Run: 70K


Use of the currently available estimates of costs and benefits, including profits and price-reduction opportunities and quality improvements, of existing or planned initiatives where major studies have already been carried out, such as for GMES and Galileo

Run: 50K

ENVIRON-MENTAL Environmental policy-making

There are no substantial existing alternatives n/a

ENVIRON-MENTAL Positive effects on environ-mental parameters

There are no substantial existing alternatives n/a


Bibliometrics with much narrower disciplinary focus Rely on space journals to conduct disciplinary reviews

Dev: 50K Run: 100K


There are no existing alternatives n/a


Synthesis of a number of very different and quite patchy qualitative studies

Run: 60K



SOCIAL Defence




20.4 Implementation: Option C

Option C offers a compromise between the ambitious and somewhat costly Option A and the economical but rather weaker Option B. In developing Option C, we chose between the approach defined in Option A and in Option B, impact type by impact type, using the following criteria:

• Impacts where space has a particularly important role

• Impacts where current methodologies are weak

• Impacts where a methodological development project can make a substantial improvement to the completeness and robustness of the overall assessment

Figure 23 presents the results of this prioritisation process. Each impact is scored high (H), medium (M) or low (L) with respect to each criteria along with a brief explanation.

Figure 23 Prioritisation of impacts for assessment

Importance of

impact Quality of current

methods Improvement

potential

ECONOMIC: Direct (upstream and downstream)

H While for the upstream

sector, space no different from any other form of public expenditure, the

stimulation of downstream activities is

M The direct effects of space expenditure (particularly downstream) are not fully

captured by current methods

H There is potential to

improve the quantification of the upstream and

downstream effects of public expenditure


Importance of


methods Improvement

potential

fairly unique to space

ECONOMIC: Indirect

M The indirect effects are

not unique to space

M Supply-chain effects of

space can be modelled using standard input/output table

techniques, taking the aerospace sector as

representative of the space sector

L While the models could be developed specifically for

space the effort required is considerable

ECONOMIC: Induced

M The indirect effects are

not unique to space

M The wider effects in the

economy can be modelled using standard macro-

economic modelling techniques

L While the models could be developed specifically for

space the effort required is considerable and added

value unclear


H Knowledge spillovers are

a key feature of public investments in space

L Current techniques are

somewhat limited - based on secondary studies and

very specific examples

M A more comprehensive and

structured approach is feasible, but many effects

will remain unknown

ECONOMIC: Market Spillovers

H Market spillovers are an increasingly important

effect resulting from application of space

capabilities

L Currently available methods are relatively weak and not

systematically applied

M Considerable benefits would

ensue from a more systematic application of existing methodologies

ENVIRONMENTAL: Environmental policy-making

H Space plays an important role in understanding &

monitoring the environment and this role is expected to increase in

future

L There are no tried and

tested methods or data sets available to assess the (ex

post) space contribution to environmental policy-

making

M Understanding how space

contributes to effective policy-making is possible via historical case studies. The understanding gained can then be put to use to assess the extent of space

contributions to environmental policy-

making (e.g. via a survey of policy-makers)

ENVIRONMENTAL: Positive effects on environmental parameters

H Space is expected to play

an increasingly important role in improving

environmental factors


tested methods or data sets available to assess the space

contribution to improved environmental parameters

M In the short-term a better understanding of the link between space capabilities

and changes in environmental parameters is required and is possible

via case studies. In the longer-term this

understanding can be used to improve modelling

techniques (such as the FeliX model)


H Space research is one of the foundation stones of public investment in civil

space

L Most work to date has focused on individual

missions or space research fields. The work has not been comprehensive or

consistent in methodological terms

M A more comprehensive view of the quality and influence

of space research output would be possible, using bibliometric and citation

analyses. However, it would be quite a costly exercise


H Space plays an important strategic role, signifying Europe’s international

standing and enhancing

L There are no existing methods or data sets

available to assess this impact

M The proposed methods are

somewhat experimental and could be trialled in the first

instance – with an initial


Importance of


methods Improvement

potential

its international reputation

focus on geopolitical impact (& not non-dependence)


H Space is considered to be

one of the ‘big science’ investments that inspire

the public and young people in particular

L There are no methods or data sets available that

enable a European-wide assessment

M The proposed method

would be relatively easy to implement and would

improve understanding and quantification of the impact

category


M Civil security is becoming

more important


tested methods or data sets available to assess the (ex

post) space contribution to civil security

M In the short-term a better understanding of the link between space capabilities

and civil security is possible via case studies.

In the longer-term this understanding can be used

to improve modelling techniques (such as the

FeliX model)

SOCIAL: Defence H The military has always

been an investor and user of space capabilities

L There are no available

methods or data sets to assess this impact category

M The method proposed

would be partial and highly dependent on the

willingness of the military to divulge information


L This is a diverse category, encompassing a range of

impacts each of which are highly complex and

dependent on a number of factors in addition to

space

L There are no existing methods or data sets

available to assess this impact category

L The proposed method could be trialled but it is not clear if any significant effects (for

such complex categories) would be found

Figure 24 shows the same table of adjudged scores (H, M or L) without the explanatory text, but with our conclusion with respect to the methodology to be implemented for each impact category and along with an indicative cost of implementation. The big changes as compared with Option A are firstly the suggestion that the overarching methodology can in the first instance be run using existing multipliers for the indirect and induced economic effects and that secondly the social impact assessment should focus on environmental, strategic and educational effects. We estimate the total indicative cost of Option C in the range €2M-€3M.

Figure 24 Recommended methodologies and indicative costs, for Option C

Imp Quality Potential Choice of

methodology*

Initial cost (to develop & run the first time)

ECONOMIC: Direct H M H Option A Dev: 100K Run: 250K

ECONOMIC: Indirect

M M L Option B Identify & apply multipliers: 30K

ECONOMIC: Induced

M M L Option B Identify & apply multipliers: 30K


H L M Option A Dev: 50K

Run: 250K


Imp Quality Potential Choice of

methodology*

Initial cost (to develop & run the first time)

ECONOMIC: Market Spillovers

H L M Option A Dev: 100K Run: 250K

ENVIRONMENTAL: Environmental policy-making

H L M Option A Historical studies:

Per study: 100K Perhaps 2 in first instance (At a later date: survey of policy-makers: 150K)

ENVIRONMENTAL: Positive effects on environmental parameters

H L M Option A Case studies: Per study: 75K Perhaps 2 in first instance

(At a later date: improve & deploy FeliX model: 500K)


H L M Option B Dev: 50K Run: 100K


H L M Option A Run: 100K


H L M Option A Dev: 50K Run: 200K


M L M No assessment -

SOCIAL: Defence H L M Option A Dev: 50K Run: 200K


L L L No assessment -

* Option A = use the methodology recommended in the report (as contained in option A)

Option B = use the fallback method (as contained in option B)

No assessment = do not assess this impact category

20.5 Implementation of proposed methodologies – difficulties and risks

Figure 25 summarises the recommended methodologies identified under option C (the combination of proposals from Options A and B, as indicated in Figure 24), and indicates potential problems associated with implementation and how these might be overcome.


Figure 25 Recommended methodologies – difficulties, risks and uncertainties

Impact Recommended approach Difficulties, risks and uncertainties Mitigation

(1) Extension of current data to include universities, research institutes and internal Agency activities

Difficulties in engaging national agencies in supplying lists of contractors and the extent of support for each

Use of Euroconsult global statistics on public funding agencies. Where necessary, exploitation of current links between ESA, national and other agencies to obtain further data by survey. Clear specification of the value to agencies of comprehensive European survey.

(2) Sampling of downstream sector actors, including details of information sources and consequences for business of non-availability of space data to better define the downstream sector

Identification of boundaries of downstream sector Low response rates among constituencies with lower levels of exposure too space funders

Specification of downstream sector to be assisted by pilot sample survey of cross-section of organisations with request for clear specification of the extent of their dependence on upstream-generated data. Low response rate is a potentially high risk, mitigation will amount to clarity of purpose, strength of ESA backing, good survey design and large ‘starter’ populations. And use telephone interviews – in own language – rather than online surveys

ECONOMIC Direct

(3) Reconciliation of data on funding with that on recipients’ sales

Requires data from recipient organisations as well as funding agency statistics, necessitating identification of contractors (as in (1) above) and survey of them, with risk of low response rates (as in (2) above)

Again, low response rate is a potentially high risk, mitigation to be assisted by clarity of purpose, strength of ESA backing and diligence in tracking and follow-up

ECONOMIC Indirect

Use existing estimates of indirect effects, using standardised factors (‘multipliers’)

Need to estimate proportion of space component in aggregate sector-level statistics, yields uncertainty

Consistent analysis of the range of estimates currently available should reduce uncertainties

ECONOMIC Induced

Use of ‘rules of thumb’ or based on averages or ranges of values derived from available macroeconomic models

Little danger of this not being achievable. However, induced effects are highly uncertain, given wide range of results from alternative modelling approaches and variable economic conditions

Consistent analysis and evaluation of the range of estimates currently available should reduce uncertainties



(1) Improved monitoring systems to identify a much greater proportion of all known cases of knowledge spillovers at national and EU levels

Uncertainty owing to lack of clarity regarding current systems of identification and incentives for disclosure, partly due to confidentiality issues (particularly associated with ESA Technology Transfer Network)

Review procedures for identifying spillovers by ESA, NASA and national European space agencies to reveal opportunities for enhancements and provide the basis for an ESA-led development initiative ESA might also consider the feasibility / appropriateness of launching some novel solutions, using competitions (innovation awards) and possibly more open data collection (crowd-sourcing!)

(2) Improved data collection allied to improved monitoring, to capture harmonised data on costs and benefits

Innovators may be unwilling to quantify the costs (additional R&D, marketing etc.) and benefits (sales, profits, value added) accruing to them from goods and services derived from knowledge spillovers

This is a well-known issue in the area of R&D evaluation and can be mitigated by follow-up procedures and sampling. Estimates of costs and benefits in cases where significant impacts from knowledge spillovers are evident may be possible without beneficiary cooperation

(3) Rolling programme of in-depth case studies to document the longer-term and wider costs of benefits of important spillovers, including estimation of gross and net effects

Depends on identification of cases and collection of relevant data, as in (1) and (2) above

As in (1) and (2) above


(4) Use of OECD space patenting information to (a) highlight particular spillovers for investigation (b) enable citation analysis for levels and trends in cross-fertilisation between space and other sectors

Uncertainties concerned with attribution of patents to the space sector. Some concerns regarding quality of underlying patent statistics, in particular where delays in updating databases have led to year-on-year anomalies, and secrecy around some areas of space R&D leading to potential underestimation of developments in space research.

Estimates of the extent of data deficiencies may be possible in some respects, while the extent of outstanding uncertainties can be reflected by confidence intervals. Results could be compared with other sources of invention/innovation data, especially the OECD’s innovation microdata project

(1) Structured compilation of major publicly-funded space initiatives from which novel devices or services are known to have been derived

May be difficulties in identification, as in the case of knowledge spillovers

Focus on major impacts, rather than all benefits. Examples of major market spillovers should be known to experts in the space field, who might be (formally or informally) approached for their views


(2) Analysis of the results of the benefits of these devices or services in terms of market penetration, and per-unit benefits to consumers and producers accruing over time, along with use of net-present-value and discounting procedures

Organisations may be unwilling to quantify the benefits (particularly profit, for producer surplus) accruing to them from goods and services derived from market spillovers. Analysis of consumer surplus may be constrained by difficulties in estimating

Flexibility regarding sources of data and analytical method should enable realistic estimates to be made in many cases



‘willingness to pay’ or in identifying products/services displaced

(3) Inclusion of assessment of consumer and producer surpluses, as a routine component of ongoing programme-level evaluations

My be contingent upon further consolidation of programme evaluation procedures within ESA and other agencies Depends on identification of cases and collection of relevant data, as in (1) and (2) above

As in (1) and (2) above

Design, test and implement a new periodical international survey of environmental policy-makers and other actors to determine people’s perceptions of the role of space investments in (i) identification of environmental problems /issues; (ii) policy development; (iii) policy implementation

Need to identify key stakeholders to participate in the survey Potentially poor response rates, exacerbated by difficulties in attributing the role of space to policy

Use of professional associations and lists of attendees at international conferences to identify stakeholders Careful questionnaire design to assist attribution problem, e.g. teasing out how policy making would be impaired in absence of space-based data


Design and implement a rolling programme of in-depth historical ‘tracking back’ case studies that reveal the nature and extent of space contributions to specific and important environmental policies or treaties

Difficult to attribute role of space, possibility of optimism bias Likelihood that space has provided little or no input to high-level environmental policy-making historically (what about the weather?)

Preliminary interviews with experts to identify fruitful areas for case study Introduction of an ex-ante element to indicate that most benefits expected in the future

Detailed case studies of identified benefits (micro level)

May be difficult to identify substantive historical cases, at this point in time

Accept risk. Focus experimental work on the most promising candidates, from deforestation to ozone depletion


Application of the FeliX model to space investments (macro level)

Models of this type are frequently difficult to calibrate rigorously and can be very sensitive to changes in (uncertain) assumptions – potential risk of GIGO (‘Garbage In Garbage Out’ or more pithily ‘Guesses In, Gospel Out’).

Undertake careful programme of sensitivity analysis on the model

Bibliometric and citation analyses with a narrow disciplinary focus

There remains some difficulty with identifying space-enabled studies even with the journals and papers in the more obvious subject classifications (e.g. remote sensing or astronomy)

Focus on the most promising subjects and journals and run a sensitivity analysis to detect where it might be safe to draw the line


Approach space journals to conduct disciplinary reviews

Possible lack of interest from space journals Risk of bias from individual reviewer(s) involved

Provide sufficient financial incentive for reviews and to ensure key experts are involved



(1) For geopolitics: Network analysis based on UN database of international space treaties

There is some risk that the UN documents and databases are out of date, and may omit important recent agreements and list treaties that have lapsed

Run some simple checks with ESA, UN and other selected agencies to test the nature and extent of any gaps or inaccuracies. Exercise judgement with regard to the extent of any necessary gap filling, with a view to arriving quickly at a baseline that other parties can submit agreements to


(2) For non-dependence Analysis of secondary data collected in the ESA, EDA, EC Joint Task Force, and case studies of technologies that have been transformed by public investments from ‘dependent’ to ‘non-dependent’

Low risk as the data required is available Not applicable

‘Eurobarometer’ style poll of current European scientists and engineers to assess influence of space missions / activity on their career choices as compared with other possibly important triggers

Risk of poor response rate to poll, exacerbated by difficulties respondents may have in identifying accurately the role of space in their career choices. Possibility of biased sample of responders, probably towards overstating role of space

Formulate omnibus survey covering issues of relevance to broad cross-section of scientists and engineers, to minimise risk of attracting predominantly space engineers. Careful design of ‘career influences’ module, including specification of other sources of influence and career destinations in order to assess comparative importance of space


Rolling programme of case studies to determine the cognitive and inspirational impact on young people of specific space-related educational programmes or visitor attractions and simulations

Questionnaires completed shortly after educational programmes or visits capture only short-term effects, likely to overstate longer-term impacts

Follow-up surveys of initial responders could be carried out after a suitable period (e.g. one year)


No assessment proposed. This area is becoming more important in policy terms, but currently there are no specific data or obvious methodologies that would permit analysts to distinguish and measure space-related contributions to civil security. Bespoke surveys and case studies may work in some settings, but it is not clear how one would create a comprehensive assessment methodology, and improvement potential appears very limited presently

SOCIAL Defence

Rolling programme of case studies to determine the functional and economic improvements realised through the use of next generation space-enabled services, including assessment of the extent to which key aspects are dependent on space capabilities

Issues of secrecy/confidentiality likely to constrain data availability and collection

Need to recognise gaps in available information and acknowledge resulting uncertainties in the contribution of space-related services


No assessment proposed. This impact category covers a diverse range of issues, mostly of limited importance and with little immediate potential for improvement.


21. Presentation and Use of the Results

In addition to appraising the different conceivable methodological options, the study team has given some thought to what would be done with the results of such an exercise. Who is the audience, and what kind of report would be expected to be made using these methodologies?

Our recommendation to ESA and its future contractor(s), is to package the results in two or three different ways, so that the messages are relevant and accessible to specific audiences. It seems reasonable to imagine the ESA Finance Director would want a very different perspective and presentation as compared with the ESA delegations or even the general public. The former would want a more fulsome and technical account, whereas the latter may wish to see only the headline statistics and to avoid technical jargon. The headline figures and key messages should also be able to be presented – packaged – in a report that is relevant to the ESA delegations (and to their national finance ministries). It is possible that the key indicators might also be published as simple scoreboard and even included within the ESA Annual Report.

If we take the ESA Finance Director as our target user, we are talking about something pretty comprehensive. The final assessment report should encompass all aspects of European public investment in space, perhaps with the exception of defence-related expenditure. Estimates of annual defence-related expenditure are published, however we have not been able to conceive of a practical methodology for measuring the effects of this investment beyond carrying out a simple cost-benefit analysis within the context of individual (non-additive) case studies.

The methodology should similarly address all major classes of social and economic benefit, however these will need to be treated:

• The direct, indirect and induced economic effects can be monetised, reported individually and added up to give an estimate of the total monetary benefits attributable to civil public expenditure on space

• There are several important wider economic effects that may be monetised, for example, market spillovers, where the reliance on case studies, encompassing unique time frames and investments, makes it rather more difficult to know how to produce a financial estimate that one can add to the estimates of direct and indirect economic effects. We recommend the analysts report this class of estimates separately on the one hand and then use a proportion of each case’s global estimate as an input to the annualised figures. This will be case specific, and will need to reflect a judgement about the scale and duration of the investments that underpin the impact. If an impact is linked to what was a 10-year programme of investment, one might credit 10% of the benefit to the current year or perhaps more robustly agree which impacts have matured or peaked in the relevant period (perhaps the two years between reports) and attribute the full estimate of the net present value of those cases to the year in question. Under this scenario, each case would appear only once in the financial account

• There are also several types of non-economic benefits where it will be possible to quantify the scale of the effects, but using other non-financial indicators, and we recommend these metrics are presented separately and are not used to adjust or otherwise weight the estimate of total economic effects. We believe that kind of multi-criteria analysis is contingent on the further development of an integrated economic model for space

• Lastly, we recommend the ‘benefits report’ include a qualitative perspective, which would be presented alongside the financial and other metrics using standard headings (e.g. strategic, environmental) and associated keywords (e.g. new intergovernmental agreement, or whatever). This rather telegraphic approach is not quite so obvious or intuitive as a financial indicator, and would need to be


elaborated in an accompanying note, describing each of the highlighted cases in a few paragraphs (what it is, who it affects, why it is important, what role was played by public investments in space)

21.1 Space benefits scoreboard

The quantitative estimates would be summarised in a selected group of key performance indicators and presented in a simple balance sheet, or benefits scoreboard, which would sit on a single page. The Scoreboard would be accompanied by a short commentary, picking out the highlights or otherwise explaining any notable trends or issues. The Scoreboard and key messages would be accompanied by a separate volume, which would comprise a more substantive report, presenting each of the headline metrics alongside a series of accompanying indicators or analyses, and supported by a more fulsome commentary and explanation of the analytical process and any limitations as regards methods or data.

Figure 26 presents a mock up of a possible Space Benefits Scoreboard, which would be populated as a result of running the proposed suite of measurement projects. The column headings are intended to create a more dynamic perspective, however it may not be possible to generate trend data in all cases in the first iteration of the methodology.

The Scoreboard would only present the key performance measures, however the methodology should be used to produce a more disaggregated view (sections in a glossy report) of both the investments and the effects, to give ESA senior management and MS delegations a deeper insight into developments within different parts of the system, whether that is the changing balance of funding or the impact of space and space education on young people.

Figure 26 Mock-up of a possible Space Benefits Scoreboard

Latest year

Previous year

5-year trend

Contextual indicators

Total EU public expenditure in space (€Ms)

EU upstream space sector (€Ms)

EU downstream space sector (€Ms)

Economic effects

Direct economic impacts (€Ms)

Indirect and induced economic impacts (€Ms)

Market spillovers (€Ms)

Knowledge spillovers (€Ms)

Estimate of total economic effects (€Ms)

Environmental effects

Policy-makers dependency on space data / services (%)

New environmental policies / initiatives launched as a result insight / evidence from space (count)

Social effects

Number of space-research articles published in ISI indexed journals (count)

Citation impact of space research normalised against average for the broader subject area where work is published (index, <1.0>)

Proportion of EU citizens that deem ‘access to space’ to be of strategic importance (%)

Proportion of EU scientists and engineers strongly influenced in their


career choice by Europe’s space programmes (%)

Number of extra EU bilateral / multilateral agreements signed

The choice of key metrics should be developed in light of experience with the Scoreboard, in terms of its value as a management tool and its power as a means of communicating the achievements of space. This kind of metrics based approach to packaging the results of successive (biennial?) assessment exercises would also lend itself to a more instrumental treatment, for internal use if not for public consumption. It is conceivable ESA and its key funding partners might define a number of targets from among this menu of effects, whether that is growth in the monetary value of knowledge and market spillovers or improvements in the relative citation rate for space research publications. It may also be possible to develop the scoreboard to reflect higher order effects, like industrial competitiveness.

Returning to the earlier discussion about packaging information for different audiences, one might imagine that a Scoreboard for the general public would be rather shorter and simpler than a Scoreboard for ESA and its delegations, tapping into the principal policy drivers and points of public interest. The following is a first thought:

• Total public investment in civil space

• Number of space missions flying or in development

• Number of new international agreements

• Number of space engineers

• Value of measurable economic effects

• Number and financial value of spinoffs from space

• Share of people that judge space to be critical to managing environmental risks

• Share of people that judge space to be of strategic importance to Europe

• Share of young people inspired to study science

21.2 Space benefits highlights

The Scoreboard could be mirrored by a similarly abridged qualitative report, presented in a tabular form and listing the major new items and highlights from the preceding 24 months covering all classes of economic and scientific effects and using names and keywords to signal achievements. Figure 27 presents a mock up of a possible tabular structure for such a highlights summary.

As with the Scoreboard the highlights table would be accompanied by a short commentary, saying a little more about each of the highlights or otherwise explaining any notable trends or issues. Again, as with the Scoreboard, the summary would be accompanied by a separate volume, presenting a much more expansive set of highlights, and supported by a more fulsome commentary.

Ideally, the summary and explanatory reports, would be accompanies by the publication of a third volume, which would present a cross-section of impact case studies, which could feature in a dedicated compendium on the one hand and be used more selectively on the ESA web site and in various press releases.


Figure 27 Mock up of a possible Space Highlights table

Context Highlights

Major new space missions / programmes launched in the period

Major new sales to international customers

Major new mergers and acquisitions

Economic

Notable space-related spinoff companies

Major new services / markets linked with space

Major new process innovations / savings

Environmental

Major new environmental initiatives linked with space

Social

Major scientific breakthroughs

New inter-governmental agreements

New educational programmes

Major new social benefits

Lastly, the overarching methodology – if implemented in full – would generate numerous other key publications, including methodological pieces which might be suitable for inclusion in major international scientific journals and perhaps an ESA-badged special publication series presenting a rolling programme of in-depth, historical analyses detailing space’s contributions in the geopolitical, environmental and scientific realms.


22. Concluding Remarks

The purpose of this final section of the report is not to present a summary of all the detailed recommendations in this report, but rather to give a very broad overview of the core issues that we have attempted to address.

22.1 Evaluation of benefits of public space investments – current state of the art

Evaluation of publicly-supported space activity has received much less attention than evaluation in other policy areas, such as education or health, or indeed in other areas of support for science and R&D – at the European level, for example, effort devoted to evaluations of the Framework Programme has vastly exceeded that spent on evaluation of ESA-supported activities. This focus on doing rather than reviewing is understandable, given the community’s overriding mission to create a European space infrastructure, whereas many other national and even European policies are explicitly implemented to effect wider social change, in educational attainment, morbidity or competitiveness. This somewhat self-contained approach to performance management is changing under pressure of tightening public finances and the economic crisis, with a growing interest in competitive advantage and ‘growth’ potential promised by space enabled services.

Partly as a result of the space community’s historical modus operandi focus, the ‘toolbox’ of specific methodologies and data source necessary for evaluating the wider effects of public space investments is relatively undeveloped. The other key factor here is the particularities of the space economy and its relative smallness, which militates against use of more general data sources to an extent that doesn’t hold for certain other areas of high value manufacturing. Particular current deficiencies are:

• A dearth of required data, for example relating to:

- Commercial and political sensitivities around the source and destination of particular portfolios of investments, which make it difficult to understand the full extent of public investments, in detail, and its primary purpose

- The space economy itself, which in many respects is poorly defined, especially with regard to the downstream component

- Space-specific stylised facts, that can be applied to existing survey results to produce estimates of indirect and induced economic effects on the one hand (‘multipliers’) and similar rules of thumb that might be used to discount for deadweight and displacement

- Consistent and comprehensive identification of ‘spillovers’ from space activity

- Information on the role of data from space in informing public policy on the environment, and in reducing environmental degradation

- Information on the social benefits from space activity

• Partly as a result of data deficiencies, past evaluations have tended to be partial and ad-hoc. They may, for example:

- Include some economic impacts (e.g. our ‘tier 1’ impacts) but not others

- Address some –but not all – of the benefits of spillovers

- Focus on economic benefits to the detriment of ‘softer’ areas, in particular environmental and social impacts. In the case of environmental impacts, this may be partly due to the perception that benefits lie mainly in the future, reducing the likelihood of identification of benefits from ex-post evaluations, Regarding social benefits, difficulties in quantifying benefits constrain the


potential for useful evaluation, despite such benefits frequently representing the major motivation for important areas of activity such as space exploration

- A lack of comparative analysis, whereby benefits are estimated but not compared with the benefits available from other public expenditures or systems of public financial management. Evaluations have typically looked at gross benefits (with or without comparisons with costs) without consideration of the net benefits over and above those available from alternative uses of public resources

22.2 Improving the evaluation landscape for space – an overview of the proposals in this report

In this report, we have made recommendations in the areas of data capture, methodological developments and aggregation of the diverse range of benefits available from space investments. The proposals made in each of these three areas are briefly summarised below.

22.2.1 Improvements in data availability

We have suggested several points where new or extended methods of primary data collection should be adopted, or where existing secondary data could be exploited. Suggested improvements in primary data collection include:

• For economic impacts: extension of data collection beyond the classical space industry to include: non-commercial upstream actors such as universities, PROs and space agencies; sampling of downstream sector actors; expanded and improved collection of data relating to spillovers

• For environmental impacts: surveys of policy makers and other actors to gain understanding of perceptions of the role of space in identifying environmental problems and in informing policy development and tracking implementation

• For social impacts: a survey of European scientists and engineers to assess the influence of space on their career choices; surveys of defence experts on the benefits of defence-related space work, to inform case studies.

Suggested improvements in use of secondary data include:

• For economic impacts: use of Euroconsult statistics on public funding agencies; use of OECD patent data as a new source of information on spillovers out of the space sector (spin-offs) – and, if required, of spin-ins from other sectors into space

• For environmental impacts: application of available information on environmental policies and treaties as a starting point for ‘tracking back’ case studies on the contributions of space

• For social impacts: use of bibliometric data for measures of advances in understanding; use of the UN database of international space treaties for a network analysis to provide evidence of strategic impact

22.2.2 Proposals for methodological development

Most of our methodological proposals are associated with the collection of primary data and application of secondary data, as described above. In addition, we propose:

• Reconciliation of data on funding by public agencies on space with that on contractors’ sales

• Development of a series of (rolling) programmes to develop and publish impact case studies, which will observe broadly standard research processes, report on common criteria and cover the full extent of relevant space impacts within a given period (e.g. a 10-year cycle). Most classes of wider economic and social benefits might usefully be encompassed by this kind of qualitative research, including:


− Knowledge and market spillovers

− Impacts on environmental policy-making and environmental parameters

− Advances in scientific understanding through discipline-level reviews

− Impacts of space-related educational programmes

− Impacts of space on military capabilities.

• Use of models to analyse impacts (FeliX for environmental (and some social) impacts, possible use of an macroeconomic model for economic impacts).

22.2.3 Aggregation and presentation of identified benefits

In Section 21, we have suggested annual presentation of results, with

• Monetised estimates of direct, indirect and induced effects

• Annual (discounted) quantified estimates of returns from knowledge and market spillovers, derived from case studies

• Non-financial indicators of environmental and social impacts, where possible

• Qualitative presentation of impacts not included in the above.

We have suggested (Sections 21.1 and 21.2) presentation of the quantified benefits in the form of a scoreboard, and non-quantified benefits in a ‘Space Highlights’ table.

22.3 Strengths and weaknesses of our proposals – what can and cannot be expected from them

In summary, we believe that our proposals would significantly improve the veracity of assessments of the impacts of public investments in space, in particular through;

• Improved definition of the space sector, clarifying the boundaries of the activities whose impacts are to be included

• Through use of improved data and methodologies, thereby improving reliability of assessment of impact

• Through inclusion of environmental and social impacts in particular, improving the comprehensiveness of the coverage

• Introduction of greater consistency of approach, for example by fostering greater awareness of the range of impacts and hence of factors potentially omitted from an evaluation, and through awareness of the importance of comparative analysis, including consideration of opportunity costs

As pointed out earlier, evaluations of public space investment are less prevalent and less developed than evaluations of other areas of public investment. We hope and expect that our proposals would significantly reduce this discrepancy. That said, some characteristics of the space sector – for example its relatively small size, leading to poor specification in national statistics, and the ‘intangible’ nature of some of its key benefits – make it a relatively difficult area for evaluation. And, of course, all the fundamental difficulties of policy evaluation in general – such as attribution problems, difficulties in establishing counterfactuals, data limitations – remain.

A further issue is that of cost – implementation of the proposals will not be cheap. But we believe providing better evidence of the nature and extent of space impacts will produce both operational (steering) and political (funding security) benefits that will far exceed the costs of developing the evaluation habit and underlying infrastructure.

technopolis |group| United Kingdom 3 Pavilion Buildings Brighton BN1 1EE United Kingdom T +44 1273 204320 F +44 1273 747299 E [email protected] www.technopolis-group.com