Space-Junk Bonds

“Tax heavens” (May 30th) looked at how to tax businesses that operate in space and the growth of offplanet finance. The more immediate market failure is not untaxed Martian income, but unpriced, man-made orbital debris; there are 140m pieces up there already.

The commercialisation of space has increased the amount of debris and lifted the chances of a Kessler event, a chain reaction of debris collisions. Defence, telecommunications, shipping and science rely on space services; investors increasingly question the risk that space trash poses to the assets they’re funding. Those profiting from space must not simply abandon their hardware there. The Outer Space Treaty of 1967 assigns liability to launching countries, but in practice space junk remains a classic tragedy of the commons. Costs are diffuse, attribution is complex and incentives to mitigate are weak.

A group of insurers in London has proposed a market-based solution: space-debris-retrieval insurance bonds. These make the operators financially responsible at launch for the risk of cleaning up what they leave behind. Launch operators would post a surety bond calibrated to the expected debris risk of their mission, modelled on surety bonds that have long been used to ensure the decommissioning of oil rigs and mines. Governments would use the surety-bond proceeds to clean up rogue rubbish. Safer designs, better end-of-life disposal, and active debris removal would lower costs. Reckless launchers would pay more.

Space-debris-retrieval insurance bonds align private incentives with orbital stewardship without requiring new sovereignty claims or complex litigation. Six global insurers have already signalled a conditional offer of up to $500m per operator.

Professor Michael Mainelli
Chairman, Z/Yen Group
London

26 June 2026 – https://www.economist.com/letters/2026/06/25/what-to-do-about-space-debris

As for the longer, unedited version:

Space Junk Bonds

Your article on the fiscal challenges of commercial outer space (“Offplanet Finance: Tax Heavens” 31 May) neatly charts how fiscal sovereignty may one day chase profits into orbit. If Sir Edward Coke was right that ownership can run to the stars, liability should too.  The more immediate market failure is not untaxed Martian income, but unpriced, man-made, orbital debris, some 140 million pieces already.  Last year a debris impact wrote off the SpainSat NG II satellite and triggered a US$400million claim.  In November 2025, a piece of orbital debris travelling at high speed disabled China’s Shenzhou-20 return capsule and endangered the crew. 

The accelerating commercialisation you describe increases the amount of debris each year and lifts the chances of a Kessler Event, a chain reaction of debris collisions. Without space services our defence, shipping, and telecommunications industries are severely impaired.  Without earth observation, positioning, and telemetry, we cannot meet 40% of the UN’s Sustainable Development Goals.  Investors increasingly question the risk that space trash poses to the assets they’re funding. Before tax collectors delineate the Kármán line to farm the heavens, they might first ensure that those profiting cannot simply abandon their hardware there.  The 1967 Outer Space Treaty assigns liability to launching states, but in practice “space junk” remains a classic tragedy of the commons – costs are diffuse, attribution is complex, and incentives to mitigate are weak.  Space trash increases, while no state has yet set aside funds to clean up their existing mess. 

A group of London insurers has proposed a market-based solution to stop the increase, “space debris retrieval insurance bonds”: make operators financially responsible at launch for the risk of cleaning up what they leave behind.  Launch operators would post a surety bond calibrated to the expected debris risk of their mission, modelled on surety bonds long used to ensure decommissioning of oil rigs and mines. Governments would use the surety bond proceeds to clean up rogue rubbish.  Safer designs, better end-of-life disposal, and active debris removal would lower costs.  Reckless launchers would pay more. Mark Garnier MP proposed an edgier name, “space junk bonds”. 

Space debris retrieval insurance bonds align private incentives with orbital stewardship without requiring new sovereignty claims or complex ex post litigation. Six global insurers have already signalled a conditional offer of up to $500m per operator.  The Commonwealth nations expressed support in their 2024 CommonSpace initiative.  The G7 or G20 could make such bonds a condition of launch, and withhold ground station access to operators who fail to comply.

Before carving up tax rights among the stars, policymakers might ensure that orbits continue to generate profits to tax, otherwise tax heavens will be beyond reach.

Professor Michael Mainelli

Chairman, Z/Yen Group

London

Background materials:

Related Posts