Evaluation of the Launchers Programme

Commonly accepted macro-economic methodologies and taxonomies were adopted, in order to produce results that are comparable with assessments made on other industrial sectors and that can be used effectively to support decision making and policy design.

In particular, the impact of the European launcher programmes is measured through:

• GDP impact, defined as the straight economic activity deriving from the injection of Participating Member States funding channelled through ESA into the space upstream (manufacturing) industry (direct impact), and then moving into a cascade of spending and economic activity down the supply chain, through components and subsystems suppliers (indirect impact), raw materials suppliers and employee’s consumer spending in the larger economy (induced impact). The GDP impact assessment includes an assessment of the Employment impact and of the Government revenues (tax money and social security);
• An assessment of the enabled revenues represented by sales within industries and services that are enabled by Ariane 5 and Vega launches. These include downstream satellite industries as well as non-space industries and services that leverage satellite services and capabilities;
• An assessment of qualitative impacts: those include several non-quantifiable, yet significant, effects in different areas: technology development, workforce skills, outreach, strategic capabilities, and national prestige.

Moreover, the study included (i) a ‘what if’ scenario analysis aimed at understanding what would have been the space launch market evolution and Europe’s position in the absence of Ariane 5 (this analysis goes beyond the scope of this short article), and (ii) a case study on French Guiana.

Both Ariane 5 and Vega were funded by ESA within the frame of the “optional programmes”.

The figures below show that, while as expected, the spending share in aerospace companies is predominant, a significant share of the cumulative total (almost one third) was actually directly allocated to companies belonging to other industrial sectors, especially to Computer Programming and Information Services. This outcome already underlines the fact that public funding of launchers’ activities cross-cuts several industrial sectors, extending the reach of the economic spur and the technology spending far beyond the aerospace sector.

The total GDP impact of the Ariane 5 programme for selected countries in the period 1988-2012 has been assessed through the total Gross Value Added and the GVA multiplier [see footnote 1]. For most countries, the GVA multipliers range between 1.6 and 3.4, while ESA average is 2.2, a good indication of the immediate positive effect of space spending. In the case of the Vega programme, the GVA multiplier has been estimated at 1.4 in ESA average across participating Member States.

GDP employment impact is calculated as the increase in employment deriving from the increased economic activity (GVA) associated with the direct, indirect and induced economic impacts. The supported Space employment (associated with direct impact), the additional employment (i.e. the one supported by indirect and induced impacts) and the total employment were assessed, leading to the calculation of an employment multiplier [See footnote 2].

The average employment multiplier over all ESA Member States when considering the Ariane 5 programme has been calculated equal to 2, meaning that for each new job supported in the space industry one additional job is supported into the wider economy. In the case of Vega this multiplier is estimated at 1.2.

As far as the catalytic effect of the Ariane 5 and Vega programmes are concerned, the revenues enabled by these launchers have also been calculated as a cumulative figure, for the period starting with the respective first commercial launches. The enabled revenues include:

• Launch revenues: revenues from launches performed for commercial/institutional customers;
• Revenues realized in the downstream satellites industries and services on infrastructures;
• Non-space industries and services realized via the satellite services and industries enabled.

The government revenues arising from the programmes include income tax, taxes on products (including Value Added Tax) and employers’ social security contribution.

A special analysis was carried out to capture the effect of the VAT exemption for ESA-funded activities.  It’s important to stress that government revenues are not a part of the total value added: they repre-sent the total spending that goes back to the government, i.e. that goes out the macroeconomic flow [see footnote 3].

Government revenues realized from Ariane 5 programme are significant for ESA Member States: these revenues do not come just from the input (i.e. the initial ESA spending), but from taxation on all the extended transactional money flow. Since ESA is exempt from VAT, most of this VAT arise from the wider economy (indirect and induced).

Until end 2012, Ariane 5 placed into orbit 133 payloads, of which the vast majority (102) were Satcom payloads (41 European and 61 non-European satellites).

Enabled revenues from satellite launches comprise the following revenues:

• Ariane 5 Enabled Revenues in the Launcher manufacturing Industry;
• Ariane 5 Enabled Revenues among European Satellite operators;
• Ariane 5 Enabled Revenues in downstream markets;
• Ariane 5 Enabled Revenues in the European satellite manufacturing industry: 57% of the satellites launched by Ariane 5 until 2012 were manufactured in Europe. Also, it is likely that Ariane 5 helps European satellite manufacturers capture additional sales from non-European operators.

All of these enabled revenues may not be strictly related to Ariane 5, as some of these revenues would have arisen anyway should some of the payloads had been launched on other launchers.

The Ariane 5 programmes Enabled Revenues over the period 2000-2012 amount to € 110.4 billion while Directly Enabled revenues are in the range of €51.5 billion (€35.6 billion in the worst case). Over the same period, ESA Participating States funded the Ariane 5 programme up to €12.7 billion, which leads to a sales multiplier [see footnote 4] of 4.1, highlighting the strong influence of ESA programme onto the economy. 

This sales multiplier relates the size (revenues) of the enabled economy to the size of upstream funding. While sales multipliers paint a strong picture about the effects of investment in space launchers, the further downstream the enabled revenues are accrued, the less direct the relationship between cause and effect becomes.

So far, three launches of Vega have been performed, therefore the assessment can only be Ex-Ante for Vega. Enabled and related revenues could amount to more than € 9 billion over 20 years, and much more if the future Copernicus downstream services were taken into account. This rough approximation shows that Vega could have a sales multiplier similar to Ariane 5.

The assessment of the qualitative impacts that the Ariane 5 and Vega programmes have had on European industry, institutions and academia is based on the outcome of interviews with the major programmes stakeholders and involved industrial actors. The collected data show that both Ariane 5 and Vega programmes resulted in substantial benefits in terms of:

• New technology and process improvements (and their subsequent exploitation in other markets);
• New IPR (intellectual property rights);
• Human capital development;
• Establishment of differentiating facilities and infrastructures for launcher development and production, which were in many cases exploited in other lines of business;
• Increased business opportunities for all companies involved;
• Beneficial effect on enrolment and on funding attraction for universities.
• Organizational management improvements, infrastructures enhancements, outreach effects on the general public and national prestige.

It means that in general, space initiative is a boost for the whole economy, since it creates expertise and skilled workforce not only on the space industry but also on the indirect and induced industry, highly important in Europe, where specialized SMEs are very active and geographically spread.

All this comes on top of the fundamental impact, which is securing Europe’s independent access to space, and the benefits that it generates at a macro level.  Together, these two launcher programmes serve an invaluable role in Europe’s successful space sector endeavours.

The impacts to the European Launcher Enabled Space Industry (ELESI), Non-Space Industry (ENSI), governments and households include:

• The commercial satellite industry would not have been significantly affected: a high percentage of them would have been launched on by a non-European rocket;
• Arianespace would have required significant financial funding from the Member States to keep Ariane 4 operational for an additional 10 years and maintain Europe’s independent access to space;
• The role of ESA would have been severely impacted:  without the Ariane 5 to deliver the five ATV supply craft, the already heavy financial burden of ISS participation would possibly be too great;
• The average household would have been mildly impacted: most of the commercial payloads would have suffered only a delay, and potentially a higher cost. Essential civil services such as weather monitoring and forecasts would still exist and would have been serviced with the Ariane 4;
• Arianespace, CNES, the major companies that developed and build the Ariane 5 and their subcontractors would have suffered great opportunity costs;
• The launcher design know-how would have been progressively lost, leaving Europe unable to develop a more competitive replacement of Ariane 4 in the future;
• Non-space industries would not have benefited as much from technology spin-off and support work: the majority of the benefits provided by healthy operation of the European launch industry involved companies that don’t provide services exclusively to the space industry;
• European governments would risk losing independent access to space: European governments would feel the impact of billions of euros that paid for Ariane 5 and Vega launch services never entering the European economy to circulate.  Countries would be increasingly dependent on foreign governments to deliver satellites beyond the capability of Ariane 4 and Vega, which removes funds from the European economy and is a potential security risks for classified payloads.

A dedicated case study was carried also out on the impact of the Centre Spatial Guanais (CSG), including ESA space activities.

French Guiana shows many of the characteristics of a developing country. CSG provides an exceptional level of high-technology activity and jobs, together with investment in the wider infrastructure of the region, incomes generated by purchases from the wider Guiana economy (by the activities at CSG and by the workers employed there and those who visit), and support for some economic development projects. In delivering services and outputs, we estimated that CSG bought in around € 13 billion of goods and services inputs over 2000-12.  Approximately two-fifths were bought in to support maintenance activities with the remainder being used to support launch activities. Overall, CSG generated € 1 billion of value added over 2000-12.

Employment at the CSG base has grown by 26% between 2005 and 2013, with little impact from the global downturn.  The impact of CSG contributed to around 46% of import duty revenues over 2000-07. Value added generated by CSG directly contributed to 2.8% of GDP over 2000-12. This figure rises to 17.7% when accounting for indirect and induced impacts on the wider economy. Similarly, the impact of CSG on total employment in Guiana was around 13% when including indirect and induced effects.  For the taxes identified here, CSG activity contributed (when accounting for indirect and induces impacts) 30.1% of total revenues raised in Guiana. CSG expenditure over 2000-2012 on maintenance activities and launches has generated an estimated € 11.3 billion in gross output in domestic sectors outside of the space sector.

Footnotes:

1. GVA Multiplier = total Gross Value Added divided by ESA spending

2. Employer Multiplier = Total Supported Employment (direct+indirect+induced) divided by Supported Employment in the space sector (direct employment

3. Given the relatively small size of the ESA launcher activities – as well as Arianespace activities – compared to the overall European

4. Sales multiplier = enabled launcher services+enabled satellite manufacturing+enabled operator revenues+enabled downstream revenues divided by ESA funding