Date of Award
Doctor of Philosophy (PhD)
Earth's orbits are a congestible resource with novel dynamic externalities. In this dissertation my coauthors and I examine the nature of orbit use externalities, study the policy choice space to classify existing policies and identify a class of optimal policies, consider the extent to which technological advancements can mitigate these externalities, and calculate the magnitude and time path of both an optimal satellite tax and the welfare gains from implementing it. Three key results emerge. First, open access to Earth's orbits drive the problems of excess collision risk and debris production. Left to their own devices, profit-maximizing firms may collapse the resource for generations by triggering a cascade of hazardous-fragment-producing collisions. Second, though the majority of extant policy discussions have focused on instruments targeting satellite launches, optimal policies will target satellites in orbit rather than the act of launching satellites. Despite physical uncertainty over collisions, price or quantity policy implementations are equivalent and either can maximize social welfare. Debris removal technologies cannot obviate the need for policy; they can only reduce equilibrium collision risk to the extent that satellite-owning firms pay for removal. Third, an optimal satellite tax (or orbit rental fee) for low-Earth orbit beginning in 2020 would start at approximately $40,000 USD per satellite per year, and grow at approximately 5.2% per year to preserve resource rents. The tax would increase the net present value of the satellite industry by around $1.75 trillion USD in 2020, and by over $4 trillion by 2040. Delaying action may be very costly: relative to a baseline of having begun optimal management in 2015, beginning optimal management in 2035 forgoes on the order of $4.6 trillion USD of permanent orbit use value in 2040.
Rao, Akhil, "The Economics of Orbit Use: Theory, Policy, and Measurement" (2019). Economics Graduate Theses & Dissertations. 98.