Europe is seeking to elevate its role in space in response to security concerns following Russia’s full-scale invasion of Ukraine, capability gaps in European armed forces, and uncertainty over U.S. space and alliance policies.

At the same time, space is becoming increasingly commercialised. Europe is encouraging private actors to enter the market, shifting the state’s role from operator to customer. Building robust space capabilities under these conditions requires navigating a set of competing objectives.

Three main tensions define the challenge: sovereignty versus speed, private-sector dynamism versus regulatory ambition, and ecosystem design versus investment preferences. To translate today’s relatively 
favourable funding environment into durable capability gains, Europe should:

  • Adopt a dual-track procurement strategy that reconciles urgent capability needs with long-term industrial sovereignty. This means sourcing from both European and non-European providers in the short term, while accelerating reforms to the European Space Agency’s work-share mechanisms.
  • Make commercialisation the main driver of ecosystem growth, expanding challenge-based procurement beyond launch services and ensuring that institutional demand rewards innovation, risk-taking and scalable business models.
  • Strengthen and retain Europe’s industrial base through targeted ‘buy European’ policies, selective consolidation where necessary, and new financial instruments – such as a Strategic Space Fund – to keep competitive firms and talent anchored in Europe.

Introduction

Space assets are now central to both economic performance (European Commission 2025b) and security and defence purposes (Süß 2025). Yet Europe faces significant dependencies on the United States in this sector, including situation awareness in space, launch
services, military space assets, satellite components and crewed spaceflight.

Against the backdrop of a shifting transatlantic relationship and a more hostile security environment in Europe, strengthening Europe’s existing space capabilities and industrial base has become a prerequisite for greater autonomy and strategic resilience. Paradoxical-
ly, however, the sector’s most dynamic and innovative developments are now emerging from the private sector – enabled by policies explicitly designed to promote commercialisation.

Political Changes Meet Commercialisation Trends

The space sector is changing, and this change is mostly driven by two trends: First, the renewed importance of state institutional demand, primarily for security and defence purposes. Second, a changing space industrial ecosystem that could, in future, thrive on commercial demand – provided policy frameworks actively support this reconfiguration.

Political Ambitions and Investments

Security concerns in Europe are intensifying, due to the threat of a militarily reconstituting Russia as well as the Trump administration’s ambiguous space and alliance policies that lay bare space capability gaps in Europe’s armed forces. Counteracting enduring dependency on U.S. space capabilities is no small feat (Süß 2025), but Europe is beginning to respond.

In line with the established division of labour across Europe’s distributed space sector, national security and defence programmes are currently at the forefront of this activity. Poland, for example, is investing in Earth observation capabilities (Adamowski 2025; Gwadera 2025). Germany’s defence minister, Boris Pistorius, has announced planned investments of €35 billion into defence-related space capabilities (Bundesministerium der Verteidigung 2025), while France has also increased planned investments (Desmarais
2025), to name but a few examples. Both France and Germany have recently published new space (security) strategies (Republique Francaise 2025; Die Bundesregierung, 2025).

At the same time, activity is increasing at the multi- and supranational levels. The European Space Agency (ESA) has announced higher spending over the next three years, alongside more ambitious planning for this period (European Space Agency 2025a), while widening its mandate to include security and defence (Kayali 2025). In Brussels, meanwhile, the European Commission’s draft Space Act is being debated intensively, with input from industry, member states and allied partners (European Commission 2025a). While these institutional actors continue to shape Europe’s space ecosystem, a shift towards greater commercialisation is already under way (Johns Hopkins University 2025). If deployed effectively, rising state investment in Europe could be used to support and accelerate this transition.

Commercialisation Trends

Commercial actors dominate media coverage and the broader news cycle about space – from the landing of reuseable rocket boosters (Tribou 2025) to private actors checking off milestone achievements such as spacewalks (Rannard 2024). This commercialisation of
the space ecosystem is arguably the most significant overarching trend in the industry and is widely expected to bring about transformative change (Schütz 2020).

Fundamentally, though, commercialisation in space 
is nothing new. Certain segments – most notably
 communications and satellite manufacturing – have
 been commercialised for decades, with private commercial demand long outstripping institutional and 
state demand by a wide margin (e.g. Eurospace 2025).
 Commercial launch companies, though all failing in
their time, already existed as early as the 1970s (Rösing 2025) and into the 1990s (Heyman 2013). Three
 of today’s most prominent private launch companies,
 SpaceX, Blue Origin and Rocket Lab, were all founded
in the early 2000s (O’Connor and Curlee 2025).

To date, however, comprehensive commercialisation
 encompassing the entire space sector – and fundamentally reshaping supply, demand and innovation
 processes – has not occurred. State-led institutional
 demand remains critical to the viability of the overall
ecosystem (Veugelers et al. 2025). Where meaningful progress in commercialisation has taken place,
­ particularly in the United States, it has largely been 
driven by changes in NASA’s procurement and 
contracting practices. Over the past 15 years, these have
increasingly shifted towards a ‘space as a service’
­ model (Schütz 2020).

Through this shift, institutional actors no longer as
sume responsibility for operating spacecraft once they
 have been manufactured and delivered by private
 firms. Instead, they purchase services – for example,
 transporting cargo or astronauts to the International
 Space Station (ISS) (NASA, n.d.-b). This model gives 
companies greater freedom in meeting the technological and financial requirements set by public clients and 
helps decouple programmes – traditionally shaped by
 pork-barrel politics – from some of the distortions associated with highly politicised markets.

Through the adoption of ‘space as a service’, state
 actors aim to foster deep commercialisation of the 
space ecosystem by shifting investment, demand and 
innovation increasingly towards the private sector, as 
illustrated in Figure 1 (Roettgen 2024). In this model,
 initial state demand creates the conditions for products and services to mature technologically, enabling
 commercial applications that, in turn, generate further 
innovation and private-sector engagement.

‘New space’ – the colloquial umbrella term for emerging business models that may underpin this evolving 
commercial ecosystem – encompasses a wide range of
 activities. These include established services such as
 satellite data for Earth observation, as well as 
manufacturing processes in microgravity and more speculative 
applications, including asteroid mining (Grest 2020).

The Flywheel of Space Commercialisation

Notably, this predominantly U.S.-driven narrative of
 commercial ‘new space’ has gained traction well beyond the United States, including in Europe. In 
pursuing commercialisation, many space actors therefore 
look to the U.S. experience as a model to emulate.

Yet the developments observed in the United States
 were enabled by a specific combination of national 
and cultural factors, including, first, a widespread perception of intense geopolitical competition with peer
or near-peer rivals in a domain of high national security relevance; second, a corresponding level of demand 
from the U.S. national security apparatus – including
 the armed forces and intelligence services – with a
strong emphasis on technological superiority; third, a 
cultural preference for limiting the role of government
 in delivering solutions to these challenges (Weiss
2014); and fourth, institutional and industrial experience 
drawn from other technology sectors, such as 
microchips, and applied to space (Schütz 2020).

Another core tenet of the U.S. approach to space commercialisation is assuring redundancy and a minimum 
of two suppliers for critical functions – from launch 
services to satellite manufacturing and human lunar 
landings (e.g. Mohon 2024). This principle is particularly important in a technologically demanding field such 
as space, where delays have affected almost every 
major programme, ranging from human spaceflight (Rou
lette 2025) to the introduction of new launch vehicles.

Conflicting Policy Goals

As Europe plans to increase space-related spending
– raising annual expenditures by at least 50% over
 the coming years compared with, for example, 2022 
levels (see Renčelj 2024) – and has largely embraced 
the U.S. narrative on space commercialisation, it is
 better positioned to begin activating the flywheel of 
space commercialisation than it was only a few years 
ago. Yet a clear strategy for translating this narrative
 into a concrete vision – one that balances competing 
policy objectives and reflects Europe’s distinct
 institutional and industrial context – remains absent. 
This gap is ­ becoming increasingly problematic given 
the compressed timelines associated with defence-driven capability requirements, which account for a
substantial share of the planned increase in investment
 over the coming years.

Sovereignty versus Time

Security pressures are acute, and non-European 
industrial suppliers may be better positioned to deliver 
hardware and services at speed. Yet the systematic
 build-up of industrial capabilities and capacities 
required to strengthen Europe’s autonomy in space
 inevitably takes time – regardless of the level of
 funding being applied.

By now, senior European politicians, military officials
 and intelligence representatives have set out stark 
timelines regarding the threat posed by Russia in the
 coming years. The late 2020s are widely viewed as a 
point at which Russia could be capable of attacking additional European countries beyond Ukraine. If Europe
– as a limited space power (Aliberti 2023) – seeks to
 enhance its military capabilities while simultaneously 
increasing defence sovereignty, it will require a broader portfolio of space assets. These span intelligence, 
surveillance and reconnaissance; positioning, navigation and timing; missile early warning and tracking; and
 communications (Süß 2025).

If rising institutional demand – particularly in security
 and defence – becomes the primary driver of Europe’s
 space ecosystem over the coming years, a clear dilemma emerges. Capabilities must be deployed rapidly to 
strengthen Europe’s deterrence and defence posture,
 yet domestic industrial capacity and capability may be 
insufficient to support an exclusively European procurement strategy. This creates incentives to contract
 suppliers from outside Europe, notably the United 
States (Erwin 2025b). Even where European suppliers 
are available, traditionally risk-averse defence procurement agencies may favour established firms over new 
market entrants offering unproven technologies. In 
addition, long production lead times and pre-booked
 launch slots require planning horizons of several years
 (Daehnick et al. 2023).

In the German context, for example, annual spending
of roughly €5 billion would require industrial capacity 
to double or more (European Space Policy Institute
 2025a), a scale-up that seems unrealistic despite industry assurances. This problem can be mitigated by
directing as much investment as possible towards
 European companies. Even so, multiple bottlenecks
– ranging from physical infrastructure and workforce 
recruitment to skills development, production processes, supply chains and their synchronisation – limit the
ease with which capacity can be expanded. Already,
 large parts of Europe’s space industry face significant
 talent shortages, particularly in areas such as software
 and data, electronics design and systems engineering 
(Copernicus 2025).
 Additionally, Europe does not make optimal use of the 
talent it possesses. Barriers to sector entry, competition 
with other high-technology industries, and weak
 development pathways for graduates and early-career
professionals all constrain workforce growth (European Space Policy Institute 2025b). For certain segments
 of the space ecosystem, this will continue to necessitate 
international procurement. Launch services,
 in particular, stand out due to the limited number of
 European launchers and constrained availability in the 
foreseeable future (Greenacre 2024) – even if European start-ups succeed in reaching orbit in the near 
term. Both transatlantic cooperation and partnerships 
with launch providers in like-minded countries such as 
Japan or New Zealand may offer partial relief.
 Against this backdrop, clear and upfront communication is essential. Explicitly prioritising the rapid delivery
 of equipment and services to European armed forces
 and intelligence agencies over near-term capability-building can help prevent disillusionment within the 
space sector, which has traditionally operated on longer development timelines.

Private-Sector Dynamism versus Regulatory
Ambition

There are different pathways towards greater Europe-
an sovereignty and autonomy in space, yet no shared
European consensus on which route to pursue. Germany 
and the ESA, for example, have placed increasing
emphasis on nurturing a nascent start-up ecosystem
through U.S.-style commercialisation approaches.
France, by contrast, continues to prioritise established
industrial actors and their proven capabilities. At the
same time, the European Union is seeking to shape
and regulate the sector in order to improve the safety and sustainability of space activities, while facing
strong resistance from member states, industry and
international partners concerned about perceived
overregulation and regulatory overreach.

European efforts to emulate U.S. commercialisation
models are most visible in launch policy. At the national 
level, Germany’s Microlauncher Competition,
launched in 2020 (Burkhardt, n.d.) supported promising 
start-ups with the explicit aim of funding innovative
concepts that could enable cheaper access to
space (Mittelbach 2020). At the European level, ESA’s
Launch Challenge – established in 2023 and preceded by the Boost! Initiative (European Space Agency,
n.d.) – marked an important milestone by selecting
five start-ups to deliver indigenous launch systems for
the small and medium launch market. In parallel, ESA’s
Flight Ticket Initiative, implemented in cooperation
with the EU, places a strong emphasis on the role of
public institutions as anchor customers for emerging
launch providers (Parsonson 2025b).

The stated objectives of these initiatives underline
ESA’s ambition to follow the U.S. model of launch
commercialisation: fostering competition among European 
launch providers, promoting a diverse access-
to-space ecosystem, supporting the development of
innovative and cost-effective launch solutions, and
enhancing Europe’s autonomy in space transportation
(European Space Agency 2025b). The selected companies and their launch vehicles are expected to achieve
orbital launches by no later than 2027, with ESA missions planned between 2027 and 2030 and mission
requirements set to expand over time (European Space
Agency 2025b). In this respect, Europe’s approach
closely mirrors NASA’s commercialisation strategy over
the past 15 years (Schütz 2020). At the heavy-lift end
of the launch market, though, European competition
remains distant. The Ariane 6 launcher is set to remain
Europe’s only heavy launch vehicle until start-ups accumulate 
sufficient technical experience and financial
resources to enter this market segment.

For satellites and other spacecraft, the EU Commis
sion’s Space Shield might offer an opportunity to
strengthen non-traditional suppliers as the EU appears
generally willing to use public procurement strategically to support the development of new space tech-
nologies (Pesonen 2022). In this context, start-ups,
micro- and mini-launcher firms, and other ‘new space’
providers could benefit from institutional demand generated 
by Space Shield and related programmes.

On the regulatory front, stakeholders broadly support
the objectives of the European Commission’s draft Space Act, particularly its focus on safety, sustainability and the functioning of the single market. At the
same time, many warn that the draft’s broad scope,
legal ambiguities, compliance burden and potential
discriminatory effects could raise costs, dampen
innovation and fragment international cooperation
(Bundesverband der Luft- und Raumfahrtindustrie
2025). Additional reporting requirements, technical
standards and insurance obligations could increase
operational and compliance costs for commercial op-
erators, especially small and medium-sized enterprises.
Lengthier authorisation and assessment procedures
risk slowing market entry and product development
cycles, while new rules on debris mitigation, cybersecurity 
and data handling could require costly design or
operational adjustments. For non-EU firms, the draft’s
expansive reach creates uncertainty over market access 
and may necessitate global compliance changes
(Office of Space Commerce 2025). Overall, legal ambiguities 
in the proposal increase regulatory risk, com-
plicating long-term planning for all commercial actors.
This stands in contrast to the U.S.-led Artemis Accords,
which 27 European states – from Iceland to Ukraine
and from Finland to Spain – have joined. The Accords
seek to establish principles governing the exploration
and use of outer space, particularly in the inner solar
system, with a comparatively commercial-friendly orientation 
(NASA, n.d.-a).

Ecosystem Configuration versus Investment
Preferences

Europe currently finds itself between two stages: an 
initial phase of increased state-led investment and
 state-funded technological development, and the emergence of new business models capable of attracting private capital and talent. If state-led investments over the
coming years deliver sufficient technological progress,
 some of today’s unfavourable trends could be reversed.
 At present, however, demand signals point in the opposite direction. While overall sales in the European space 
industry have stagnated at around €8.5 billion over the 
past decade, the commercial share of those revenues
– including exports – has declined. Institutional demand 
has therefore grown in relative importance, with 
commercial sales accounting for only around a quarter 
of total revenues in 2024 (Eurospace 2025). In the early 2010s, sales were still split almost evenly between 
commercial and institutional customers.

This shift largely reflects structural changes in the
 market. Europe’s traditional industrial strengths –
namely highly complex, high-quality large satellites for
 geostationary orbit – have lost relevance as communications traffic has become increasingly digital and as
satellite constellations and associated capabilities have
 proliferated in low Earth orbit (European Space Policy
Institute 2025). With security- and defence-related 
demand now taking the lead (Erwin 2025a), and with 
continued improvements in the technical performance
 of smaller satellites – alongside their greater resilience
 when deployed in constellations rather than as single
 platforms – these trends are likely to intensify further
 in the coming years. State demand should therefore 
incentivise incumbent firms to redirect internal development efforts, both in terms of space assets towards
 smaller satellites and, more importantly, in production
 processes away from bespoke manufacturing and towards mass production. At the same time, established
 commercial success for launch services from Ariane-
space suffered from delays in the introduction of the
 Ariane 6 launcher, losing market share to SpaceX in
 particular (Triezenberg et al. 2024).

Additionally, most European space companies continue to generate a substantial share of their revenues 
within Europe and from European customers (Euro-
space 2025). Relying on exports as a solution is thus
 not tenable. At the same time, the emergence of new
suppliers increases global competition across the value 
chain. Institutional demand will thus need to strike 
a careful balance between reinforcing the tradition
al strengths of established suppliers and supporting 
emerging firms with technological potential that is 
better aligned with prevailing economic trends in the 
space sector.

This challenge feeds directly into the broader question 
of whether a genuinely commercial European space
 industry is viable, and it underscores the need for 
targeted policy interventions to steer the ecosystem
 in that direction. Even in the United States – where
national security demand is far greater than in Europe,
 and where SpaceX has captured large portions of the 
globally contestable heavy-launch market – questions
 persist over whether demand is sufficient to sustain 
more than one heavy-launch provider, or whether
substantial internal demand, such as SpaceX’s Starlink
 programme, is a prerequisite for commercial viability
 (Triezenberg et al. 2024). While European small and 
medium launch providers may initially carve out niches by supplying launch services to European armed
forces, entry into the global heavy-launch market will
 face significantly higher barriers. A similar adjustment 
challenge confronts Europe’s satellite manufacturers,
 as demand increasingly shifts towards low Earth orbit 
constellations.

Consequently, purely competition-driven, open-market policy approaches are unlikely, for the time being,
 to deliver the degree of commercialisation European
 governments are seeking. To avoid monopolistic out
comes with price-setting power, Europe should consider adopting the U.S. approach of maintaining and 
supporting a minimum of two suppliers in critical segments, even where this entails higher per-unit costs,
 particularly for launch services. In other areas of the
 space industry, the risk may be less acute, although
further consolidation among large legacy players could 
nonetheless prove problematic in this regard (Parson-
son 2025a).

Finally, the United States shows little sign of revising 
its approach to space commercialisation and is likely
 to continue leveraging its first-mover advantage (The
White House 2025). In fact, with a greater focus on 
China as a geopolitical competitor in space (Nelson et
al. 2025), rising defence-related space spending – in
cluding for the U.S. Space Force and programmes such 
as Golden Dome (Bowen 2025) – and the continued
 maturation of private space firms (Swope 2025), transatlantic competition in the space domain will intensify.

A European Way Forward

Commercialisation holds the promise of transformative 
change in the space sector. With rising levels of investment, Europe can now begin activating this dynamic in 
earnest. Simply replicating the U.S. approach, however, 
is unlikely to succeed – both for economic and political 
reasons. Europe will therefore need to chart a similar,
 but adapted, path. Three steps are particularly important:

  1. Given the favourable funding environment and
 outlook, European states should pursue a dual-track approach in which national or European 
solutions are developed in parallel with the procurement of launches, equipment and services
 from non-European suppliers. Compared with other areas of defence spending, overall expenditure
 in the space domain remains relatively modest,
 making such a dual-sourcing strategy feasible. This 
approach can help reconcile urgent time pressures
 with the longer-term development of domestic
 capabilities, even if initial investments fall short of
 the scale desired by European industrial players.
 For ESA and the EU, which already place a stronger
 emphasis on European procurement—for 
example through ESA’s work-share arrangements—this
 tension is less pronounced. Nonetheless, ESA’s
work-share system could benefit from reform,
 shifting towards a model that balances industrial
 shares across its expanding portfolio of projects 
rather than within individual projects, akin to the
Organisation Conjointe de Coopération en Matière
d’Armement’s (OCCAR) global share concept (OC-
CAR, n.d.).
  2. Commercialisation is Europe’s most promising 
route to expanding its space ecosystem (Veugelers
et al. 2025), a view broadly shared by the European Commission (European Commission 2025b).
 The U.S. practice of soliciting private-sector
 solutions through challenge-based procurement
– most visibly through ESA’s Launcher Challenge
– has demonstrated its relevance in the European 
context as well, given Europe’s strong aerospace 
talent base and maturing start-up ecosystem.
 While the current lack of challenges beyond 
launch services and low Earth orbit cargo transport may appear unambitious, it reflects a focus on 
those industry segments with the greatest commercial potential at present. These include both 
legacy demand for launch and emerging activities
 such as microgravity manufacturing, where related
 Earth-based industries are long-standing 
European strengths. Member states, and the European
 Commission in particular, should therefore concentrate regulatory efforts on enabling these 
activities, while steering institutional demand ­ towards
 greater openness and a higher tolerance for risk
­ (Veugelers et al. 2025).
  3. Nurturing Europe’s space ecosystem will require 
a deliberate commitment to ‘buy European’ wher
ever feasible. Without such an approach, the 
first-mover advantages already secured by U.S.
firms – particularly in launch and reinforced by the maturation of additional launch systems in the 
coming years – risk undermining long-term 
industrial security and planning certainty in Europe. At
 the same time, both the European Commission
 and member states will need to articulate a clearer
 vision for the sector, one that reconciles Europe’s
 limited market size with a realistically scaled competitive landscape. This is likely to entail consolidation or the exit of some firms (Veugelers et al.
2025) and will need to be more specific than the 
Commission’s current broad strategic framework
 (European Commission 2025c). At the same time,
 retaining innovative companies in Europe will also 
require sustained access to both public and private 
capital. For the EU, this could take the form of government-sponsored venture capital (GVC) within 
a Strategic Space Fund, as recommended by the
 European Space Policy Institute (European Space
 Policy Institute 2025a). The financial commitment 
for such a GVC can be modest: even In-Q-Tel, the
 well-known CIA-backed government venture capital vehicle, which invests across four areas – space,
 energy, microchips and biotechnology – deploys
 only around €100–150 million annually (ProPubli-
ca, n.d.). ESA, particularly in light of its expanded 
remit to include resilience, could oversee such a
 fund as a non-profit entity. Its three-year budget
 cycles would offer both investment stability and
 sufficient time for portfolio companies to deliver
 initial results, while ministerial meetings could be 
used to define overarching investment priorities.
 This would allow for a more direct investment 
control and direction than current instruments like
 CASSINI (European Commission, n.d.).

Sources can be found in the PDF version.

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About the author

Torben Schütz is Senior Expert in the Bertelsmann Stiftung’s Europe Programme.

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