Meld. St. 32 (2012-2013)

Between heaven and earth: Norwegian space policy for business and public benefit — Meld. St. 32 (2012–2013) Report to the Storting (White Paper)

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5 The European Space Agency

Membership in the European Space Agency (ESA) has been the mainstay of Norwegian space activity since the country became a member in 1987. Our participation in the organisation has contributed greatly to the growth of a competitive space industry, to the spread of technological expertise in government and business, and to the internationalisation and strengthening of Norwegian research. ESA has put us in a position to develop autonomous national capabilities even as we exploit the economies of scale that come with working in a large organisation. Like most ESA member states, Norway never would have had the financial or human resources on its own to develop large and advanced satellites, launch vehicles or space probes. By pooling their resources in ESA, member countries have been able to achieve results that most would have been unable to accomplish otherwise. ESA has not only put Europe on the space-technology map, but has made it possible for Norway and other member states to develop expertise sufficient to protect their interests in strategically important space technology and infrastructure.

ESA is an independent intergovernmental organisation with 20 member states, headquartered in Paris, with an annual budget of about 4 billion euros. The EU and ESA work closely together, and their memberships overlap. (Among ESA members, only Norway and Switzerland are not members of the EU.) ESA’s role has primarily been in technology development. While ESA was responsible for the bulk of development work underpinning the Galileo and Copernicus programmes, it’s the EU that sees to their operational funding. Under the 1975 ESA convention, ESA activities are to be restricted to peaceful purposes.

5.1 Context for Norway’s ESA participation

ESA was founded in 1975 through the merger of the European Space Research Organisation (ESRO) and the European Launcher Development Organisation (ELDO), both of which traced their origins to the early 1960s. While ESRO had had considerable success in developing scientific satellites, ELDO had never achieved its goal of developing a launcher that would give Europe independent access to space. The purpose of both ESRO and ELDO, and later of ESA, was to pursue European self-reliance in space technology. A great deal of space technology development was then taking place in Soviet and US military programmes closed to European countries. The 1975 merger was intended to improve the return on investment by member countries, in part through increased focus on industry and user-group interests. In the 1970s and 1980s, ESA developed the first European launchers in the Ariane series as well as a number of satellites and space probes, some for basic research and others for applied development projects in communications, earth observation and other fields.

Norway was never a member of ESRO or ELDO, and chose at first to remain outside ESA as well. Participation was not seen as relevant enough to Norwegian research or industry needs. What little there was of publicly funded space activity in Norway (primarily associated with the Norwegian Defence Research Establishment) was confined to domestic programmes or collaboration with US research institutions. Things began to change, however, in the late 1970s. The cause was complex, but three factors predominated.

First, Norway had developed a substantial community of experts in satellite communications. This expertise had sprung from the need for communications at sea by the Norwegian merchant shipping fleet. But as the 1970s unfolded, some Norwegian actors discovered that their expertise was in demand internationally. Norwegian participation in international development projects became increasingly important as a means of sharpening technological prowess and competitiveness.

The second factor that drew Norway towards ESA membership was the vast expanse of ocean that fell under Norwegian stewardship in the 1970s. It soon became clear that the proper exercise of administrative responsibility and sovereignty across such enormous and desolate areas would necessitate extensive satellite monitoring. ESA participation became a tool for developing the competence Norway would need to fulfil its stewardship obligations.

A third factor in the decision to move closer to ESA was a desire to strengthen Norway’s industrial competitiveness by tying Norwegian companies more firmly to international networks. In the 1980s, technological innovation was increasingly recognised as a fundamental driver of economic growth. ESA participation was seen as a tool for technology transfer and a channel to new markets for high-tech Norwegian companies.

That was the background for Norway’s agreement, in 1981, to become an associate member of ESA for a limited period. Norway became a full member on 1 Jan. 1987.

5.2 ESA’s organisation

ESA’s goals and governance structure are set out in the ESA Convention of 1975. The agency’s highest governing body, the ESA Council, normally meets four times a year at the delegate level. Council delegates represent each of the member states and take positions on topical issues related to the management of ESA activities. As an associate member, Canada has the right to express its views. By act of the council, the European Commission and individual EU member states that are not ESA members may attend meetings and speak out on issues concerning matters of common interest to ESA and the EU.

Every three or four years, the ESA Council meets at the ministerial level. Ministerial-level council meetings are attended by ministers with responsibility for national space programmes. These council meetings determine long-term programming activity, membership contributions and overall strategic guidance. The last ministerial-level council meeting took place on 20–21 Nov. 2012, in Italy.

Figure 5.1 Ministerial-level ESA Council meeting in Naples, 20 Nov. 2012

Figure 5.1 Ministerial-level ESA Council meeting in Naples, 20 Nov. 2012

Source ESA/S. Corvaja, 2012

In addition to the ESA Council, ESA has four standing committees at the technical level, all of them with an advisory function. These are: the Industrial Policy Committee (IPC), which is responsible for ESA activities related to industrial development; the Administrative and Finance Committee (AFC), which follows through on ESA budgets; the International Relations Committee (IRC), which sees to relations with third countries and international organisations; and the Science Programme Committee (SPC), which has responsibility for ESA’s scientific activities. In addition, programme boards have been established in each area of ESA activity, such as earth observation, navigation, communications and technological development.

Daily operations of ESA are supervised by an administration headed by a director general. The director general is appointed by the ESA Council for a term of four years, and can sit for more than one period. Frenchman Jean-Jacques Dordain has been the director general of ESA since 2003. Under the director general are about 2,000 employees divided between the agency headquarters in Paris and various technical centres in Germany, the Netherlands, Italy and Spain. Of all the European organisations active in space, ESA has the broadest base of technical expertise.

ESA is funded primarily through member-state contributions, of which there are two kinds. Contributions to mandatory activities go towards the funding of ESA administration, basic technology development and the science programme. In addition, countries can make financial commitments enabling them to participate in a variety of optional programmes. Those commitments are made at the time of ministerial-level council meetings. In addition to member-state contributions, ESA gets significant financial support from the EU and EUMETSAT.

5.3 ESA programmes and industrial policy

ESA’s research-and-development activities are organised into programmes. These can be grouped into two categories: the mandatory programme and the optional programmes. The mandatory part is divided into the general budget programme (accounting for about a third of the budget) and the science programme. The science programme is focused on scientific research, such as exploration of distant planets, solar research and the search for dark matter. General budget programme activities are geared towards basic technology development.

The optional programmes are funded through financial commitments made voluntarily by member states on a programme-by-programme basis. Such commitments come in addition to the states’ mandatory contributions. The motivation is usually to ensure participation in a certain programme by one’s own national industries and research bodies. Optional programmes are mainly focused on the development of technology and applied services for communications, navigation and earth observation. It is the optional programmes that are of particular interest to Norway, as they cover technology areas where we have major industrial interests (like satellite communications and launch technology) or end-user interests (like earth observation).

ESA contributions are tied to the member countries’ net national income (NNI). Mandatory subscriptions in particular are based directly on NNI share, with each country’s percentage share of mandatory programme costs equalling its share of the combined NNI of ESA member states. For optional ESA programmes, contributions are essentially voluntary. Contributions representing less than a quarter of a country’s NNI share level, however, give the country no voting rights in the programme in question.

ESA programmes are tightly linked to ESA industrial policy, which includes a principle of guaranteed industrial return. In principle, each member state’s share of industrial contracts in a programme shall equal the percentage of programme costs that the country pays for, with a deduction for administrative costs. In practice, a country’s return rate depends partly on its ability to deliver competitive products. For most member countries, the principle has worked well. The industrial policy ensures that member-state industries come into contact with ESA technology programmes while bolstering support within the member states for continued ESA participation.

Through ESA’s industrial return policy, most member countries have found it possible to build a competitive space technology industry. The result is true competition between companies on price and quality. ESA policy is to actively promote industrial development in countries that struggle to achieve full return on their contributions.

5.4 Norwegian ESA participation over time

Norway’s annual ESA participation, as measured in unadjusted kroner, has gone from just under NOK 100 million in 1987 to nearly NOK 500 million today. Figure 5.2 shows the change over time in mandatory contributions and annual payments to optional programmes.

Figure 5.2 Norwegian participation in ESA programmes

Figure 5.2 Norwegian participation in ESA programmes

Source Norwegian Space Centre

The long-term increase in Norwegian contributions is attributable to two factors. The ESA budget increased by 5 per cent annually until 1994, and Norway’s NNI share has almost doubled from 1987 to the present. Fluctuations from year to year are due to exchange-rate variations. The purchasing power of the mandatory contributions has been fairly stable over the past decade.

Norway’s involvement in optional programmes was relatively stable from 1993 to 2005. At the ministerial-level meeting in 2005, great emphasis was placed on the importance of space investments to support the Government ‘s High North policy and Norwegian technology development. Norway contributed funds about equal to our NNI share of all the new optional programmes. The effect of this increase and an investment in new programmes at the ministerial-level council meeting in 2008 account for the sharp rise in contributions from 2006 onward that can be seen in Figure 5.2. At the ministerial meeting in 2012, Norway declared the equivalent of a little below its NNI share in new optional ESA programmes (see Prop. 74 S (2012–2013)). The motivation for Norway’s increased commitment is the opportunity it represents to develop technologies and markets, particularly those related to national utilisation of satellite data. In the case of earth observation, Norway pays about 2 per cent of the European total, and uses 15 to 20 per cent of the information, with a focus on information relevant to our expansive northern areas.

Until 2000, the level of industrial return to Norway was good for all ESA programmes. Since then, the return level for optional programmes has remained good, but it has been hard to achieve a satisfactory return level in the mandatory programme. The main reason for this is that Norwegian companies capable of contributing to satellite construction are relatively niche-oriented. In addition, wage growth in Norway has made it increasingly difficult to compete on price. ESA and Norway together have examined how these structural problems can be rectified. ESA has used internal funds, and Norway has used the technology programmes to strengthen the competitiveness of Norwegian actors. Norway’s return has improved since 2010, and stands in 2012 at 95 per cent of the nominal value. In the straightforwardly technological programmes, Norway’s nominal return is in line with what the programmes call for.

The utility of Norway’s ESA membership was evaluated by PwC in 2012. The evaluation emphasises that revenues in the Norwegian space economy are unusually large for a small country, accounting for close to 2 per cent of the global space economy. The main conclusion was that Norwegian industry and end-users alike have benefitted greatly from the country’s ESA participation, and that the industrial projects return clear socio-economic value.

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