Use Industrial Policy to Claim Canada's Place in Space

Summary

Canada has a proud 60-year heritage in the space sector creating mature space capabilities. However, in the last decade, even as the sector as a whole has advanced significantly, growth in Canada has stalled. A major factor holding back the industry is industrial policy and ineffective procurement. There is a strong ecosystem of both startups and world-class space companies in Canada, but no route to turn today’s new ventures into globally scaled winners.

Canada has the talent, education, and track record needed to win in space. In addition, the current macroeconomic environment has left a void in global leadership, which Canada should claim as a neutral, globally trusted country. However, the country must have the right industrial policy. If the Canadian space industry is to reach its potential, it will require a clear strategy for investing in space to help our companies scale into the global champions they deserve to be. Achieving these goals is essential for Canada's economic future, security, and sovereignty. 

Bold target: Quadruple Canada's space sector revenue to $20 billion by 2035.

Background and Motivation

The global space industry is expected to hit $2.5 trillion* by 2035, just shy of Canada's entire current GDP¹. This economy includes launch facilities and other traditional symbols of space flight but also infrastructure to power communications, navigation, weather forecasting, and monitoring of the planet.

At this scale of economic and strategic impact, space is not simply a bold ambition or an exciting dream. Space companies are becoming a key part of the global economy, and being a meaningful player in this sector is crucial to Canada's economic future, security, and sovereignty. 

For decades, Canada led where others followed. Canada was the third country to reach space. In 1962, the Alouette-1 satellite orbited Earth, long before most nations had any capacity for this kind of achievement². Canada created the first domestic satellite communication system³. And, in the Shuttle era, the Canadian-designed Canadarm was the backbone of space operations. However, despite the country's history, Canada has not maintained its leadership position to be a primary beneficiary of the new space economy.

Today Canada's space sector is stagnant if not declining. The industry generated $5 billion in revenues in 2022, less than the $5.59 billion generated in 2017^{4 5}. Over the same period, the global space economy grew to over $850 billion*. As a result, Canada shrunk from holding a meaningful slice of the space industry to less than 1%. This story is not just about US and Chinese dominance, but about a general complacency. We stopped investing in space while countries like India, South Korea, and the UK increased their focus and spending. As a result, they’ve surpassed Canada. We now rank 12th globally in space investment and 22nd among OECD nations for the proportion of our GDP that comes from the industry⁶.

Today, we still have a strong space industry, from the success of programs like the Canadarm, but we are approaching a point where this stagnation could erode the first mover advantages that have made us a leader in the race. Meaningful gaps are starting to appear in the knowledge required to create a thriving industry. Experts warn we're approaching falling below a "critical mass" for maintaining capabilities⁷.

Luckily, the core problem isn't a lack of raw talent or ideas. Canada still produces world-class space technology and maintains global leadership in robotics. It’s not even a problem of investing in basic science. Our R&D intensity in space manufacturing runs 11 times the average and hit a new high of $593m in 2022, driven primarily by the private sector⁸. The problem is what happens when we go to turn these bright ideas and early startups into great companies. We're brilliant at the innovation and startup phase, but we need to radically improve our efforts to scale and produce global winners.

Today, 93% of Canadian space firms are SMEs under 500 employees⁹— crucial to innovation but largely excluded from large-scale contracts. There is no structured procurement pathway to transition validated technologies into production contracts. Instead, firms rely on fragmented streams (IRAP, SIF, STDP, provincial funds, venture capital), lacking a domestic anchor-customer framework. There's no Canadian bridge. Companies with proven technology can't access the contracts they need to scale up manufacturing, hire specialists, and compete internationally. They're forced to leave the country for financial support and bring their high-end technology to markets that can support their ambitions. This creates vulnerabilities for Canada both economically and strategically.

What Must Be Done

To solve these problems we need a concerted industrial policy approach that sets a coordinated space strategy for Canada, empowers agencies to scale novel technologies, reforms space procurement to focus on capabilities rather than system requirements, and removes regulatory overhead to make it easier to build global winners in Canada.

Develop a National Space Council. Establishing a National Space Council in Canada led by the Prime Minister’s Office to elevate space as a national strategic priority. The council's mandate is to develop Canada into a global space leader. This council would bring together stakeholders from across government, defence, industry, and academia to coordinate and set a cohesive space strategy for the country. With the authority to propose relevant legislation and policy, it would ensure alignment across ministries and drive long-term investments, regulatory clarity, and industrial growth. Positioned at the highest level of government, the council would empower Canada to respond to the accelerating pace of global space innovation. The council can help to assert Canada's leadership in this critical domain, not only achieving the sector's economic potential but ensuring the industry maintains Canadian sovereignty.

Create an Anchor Customer Framework to Accelerate the Delivery of Space Capabilities For space systems, establish a three-phase funding program that could be used to direct existing government spending towards novel capabilities in coordination with the national space council. The aim would be to create a domestic anchor-customer framework with material backing (greater than $1 billion) to motivate private sector participation. Phase 1 provides $100,000 to $1 million for proof-of-concept work. Phase 2 funds companies with $1-10 million for prototype development and testing. Phase 3 delivers $10 million-plus production contracts for systems ready to deploy. Each phase should be under contract within 90 days of announcement or unsolicited proposal submission. As part of this pipeline, the Financial Administration Act would be amended to allow the Canadian Space Agency, the recently announced BOREALIS, and other relevant agencies to bypass standard procurement limits. The agencies can create clear advancement criteria based on performance milestones and must be given complete authority to act. Existing authorities for temporary civil servants should be used to bring in private sector expertise in the evaluation and execution of proposals.

Mandate Commercial Services Procurement and Decentralize Execution Authority. Today, government procurement of space capabilities relies on highly detailed system-level requirements - exhausting years of effort to develop these requirements before starting procurement. This yields significant program delays, outdated capabilities, and a thinning industrial base that cannot afford to wait the time to serve Canada's interests. Instead, the relevant agencies must move to procure commercial services and specify only the high-level capability requirements. This approach empowers industry to define technical solutions, manage system design, and drive development timelines—allowing government users to focus on mission outcomes, not specifications on a vastly accelerated basis. To support this transition, procurement authority should be decentralized by embedding pre-qualified Public Services and Procurement Canada (PSPC) specialists directly within departmental program teams. These specialists—matrixed from PSPC and aligned with central standards—would enable faster, mission-aligned contracting while preserving oversight and compliance. By placing procurement decisions closer to operational users and adopting a commercial-services-first mandate, the government can move at the pace of innovation, reduce complexity, and better harness the strengths of Canada's space industry.

Launch Comprehensive Regulatory Reform Canada's first comprehensive launch licensing regime should be established with a streamlined approval process for commercial launch operations with maximum 90-day timelines. Reforms are also needed in the implementation of the Remote Sensing Space Systems Act, to create transparent class exemptions and eliminate delays that can stall projects for years. Canada's radio spectrum licensing procedures must also be reformed to require public disclosure and 30-day comment periods so as to improve the current opaque process that leaves companies uncertain about regulatory decisions. These reforms will streamline regulation with a goal to become the most robust investment-friendly environment for space ambitions.

Common Questions

Isn’t the space race a dated concept from the Cold War? No. Space has become an essential area of growth and national security. We must take a bold industrial policy stance to grow our space economy. If we do not, we will fail to capitalize on a unique opportunity to grow our economy and secure our sovereignty.

Won't this just use taxpayer money on corporate welfare? Every dollar spent on space technology historically returns $3 to the economy through job creation, exports, and spin-off innovations¹⁰. All the while we're buying capabilities Canada needs for communications, weather monitoring, and national security while creating an industry that competes globally.

Why should the government get involved instead of letting the market decide? The government is a major customer for aerospace companies, because the technologies heavily contribute to the public good (e.g., weather and climate monitoring) and national security (e.g., secure communications, monitoring). The United States Department of Defense and NASA's Commercial Orbital Transportation Services program used similar approaches to enable SpaceX and dozens of other successful companies. It is critical to streamline how the government procures these critical services from the space industry and thus bolster Canada's capabilities.

Isn't this just Ottawa creating more bureaucracy? No. By decentralizing procurement decision making and reforming regulations these changes can reduce the burden on investments, streamline procurement, and create clearer accountability.

Conclusion

Canada built the technology that makes the International Space Station work, but we're losing our edge while other countries surge ahead. We have the talent and innovation to lead in space, but we've built a system that keeps our best companies small while foreign competitors grow massive. The solution is clear: bridge the gap between ideas and production-scale companies through smart procurement, a space strategy, and streamlined regulation.

Canada should act now to claim its place among the stars, lead the space sector, and quadruple revenues to $20B. The space economy will define much of the next century. It is essential that Canada secures its rightful place as a leader in this industry.

*Unless stated all figures are approximated to Canadian Dollars