Who should be in charge of European space activities, the European Space Agency or the European Union? The question is not new. With the Galileo program, the EU became the single biggest contributor to ESA’s budget. As such, the EU has tried to gain more power over ESA. Both ESA and the EU are European organizations with space authority, so why should the responsibility for space activities be divided between two institutions?

Some think this division causes inefficiencies and increased overhead costs. The EU argues that all space activities should be conducted under the umbrella of the EU. The debate reached its height at the time of the ESA ministerial conference in 2012, when ESA was able to broadly retain its position and autonomy. ESA’s impressive record of conducting successful space missions; designing and producing one of the world’s most reliable launchers, the Ariane rocket family; and managing a European space industry that is competitive on a global scale certainly helped to reinforce ESA’s arguments. So is the debate thus settled? No.

ESA was successful in the old world where space funding was provided by governments, resulting in a stable foundation for European (and global) space activities. The money for the space industry was secure and did not encourage risk-taking in the development of new space technologies. As a result, the space landscape has not changed much in the last 30 years. Technological details may have improved, but nothing much changed in the big picture. With a few exceptions, such as electric propulsion, innovation was limited to increasing efficiency of existing technologies. Access to space remained expensive, satellites continued to be big boxes incorporating many sensors, and the components of spacecraft and rockets became little more advanced than those used in the Apollo era. Additionally, we are not palpably closer to going beyond Earth orbit than 30 years ago.

This environment meant that launcher industries around the world were utterly surprised by the rise of SpaceX. They were surprised because the need to evolve launcher technology by a giant leap was not apparent to them. SpaceX shows that technology has advanced sufficiently in the last 30 years to enable new, game-changing approaches to space access. Why did none of the other launch providers even start to tap into this technological potential?

The answer is that they were too comfortable in their positions. They were not in an existential crisis because their launches were guaranteed by government contracts that do not encourage risk-taking. And, unfortunately, they were right. It is not only the fault of the launcher industry, but also the lack of vision and leadership in politics that brought upon today’s situation.

The debate over who should be in charge of European space is not over. The surge of new players entering the space sector and an increasing amount of private funding are challenging the status quo. The new entrants are in the process of fundamentally changing how space is done, and ESA will feel the heat of this change with increasing intensity over the next several years. The first signs of cracks in the foundation of ESA have already become apparent.

The geographic return policy — guaranteeing 90 percent of a nation’s investment in a program comes back in the form of industrial contracts — is a fundamental pillar of ESA’s structure. At the core of this concept is the desire of European nations to develop their high-technology sectors and to engage in space activities. ESA member states pay a membership fee to ESA and get equivalently valued high-tech space contracts back to their industry as part of the agreement. This is the major incentive for smaller European countries to be members of ESA. They don’t have the capability to bid for space contracts on a competitive basis but geographic return ensures their chance to win them none the less. In other words, geographic return does not aim to increase efficiency but has other goals, such as developing high-tech sectors in member nations.

This approach was feasible and successful in the old space world where governments were the primary funding body, which allowed for political motives, such as the preservation of jobs, to take precedence over performance. However, in a situation where the price gap for a given performance (say, developing a rocket) becomes sufficiently large, even governments cannot ignore efficiency considerations.

To illustrate the lack of efficiency in a policy driven industry, one can consider the development costs of Europe’s Ariane 6 and SpaceX’s Falcon 9. Ariane 6 is meant to save costs by utilizing heritage hardware resulting in a projected development cost of about $4 billion. In contrast, SpaceX states that Falcon 9 required an investment of about $400 million (including Falcon 1) to develop from scratch. Even when allowing for some inaccuracies in these numbers, it is obvious that efficiency has not been the only or first consideration in the history of European space.

Today we are entering an era where efficiency becomes the primary driver for awarding space contracts because private investment makes up an increasing portion of the space economy. The established system of how space works in Europe is thrown off balance.

In an attempt to design Ariane 6 rocket to launch cost standards set by SpaceX’s Falcon 9, ESA has scrapped its fundamental principle of geographic return for the production of the new launcher. The significance of this step cannot be overstated. It is the realization that ESA has to draw every register, even altering one of its core principles, in hopes of maintaining Europe’s competitiveness in space.

For now, the disregard of geographic return is limited to the big but singular launcher sector, and ESA would like to reinforce this impression. However, the decision was fueled by increased competition in the launcher sector. What happens if competition increases significantly in other sectors, such as the satellite manufacturing industry?

In January, news surfaced that Elon Musk, working with and funded by Google, wants to create a constellation of about 4,000 small satellites to provide global Internet access. A new SpaceX factory dedicated to manufacturing satellites will be created as part of that effort. The Virgin Group, together with OneWeb, has similar ambitions. It is very likely that this development will challenge the next major sector in space: satellite manufacturing. It is easy to imagine that Europe’s satellite manufacturing industry will experience a shock similar to what the launcher industry is experiencing now. It is also possible that ESA will again try to increase efficiency by disregarding the geographic return principle.

How would such a move affect the desire of smaller European nations to be members of ESA in the long run? Geographic return is a major incentive for these nations to be a member of ESA. If the policy does not exist, it is questionable if these countries want to continue to pay membership fees that benefit industries in more-competitive countries. A decline in the number of ESA members is the likely consequence. The very existence of ESA would be called into question.

The EU does not have this dilemma to begin with because contracts from the EU are awarded on a competitive basis. The EU therefore has a strong case to increase its authority in European space since its infrastructure is already set up to meet a competitive market.

But will geographic return really become obsolete? In all areas where commercial interests are the primary incentive (for example, Ariane and the European Data Relay System), this outcome is the most likely one. However, there are other areas where commercial considerations are not decisive. Science and exploration missions as well as human spaceflight are examples. These areas have a good chance to experience a continuation of the ESA principles because they strengthen Europe as a whole.

In the end, ESA could remain intact but lose many of its responsibilities. By refocusing ESA on space science and human spaceflight, ESA has a strong case to reassert its raison d’être since ESA is already established in these fields, in contrast to the EU. A second option is to allow ESA to apply geographic return to some projects and disregard it for others. Thus, less-competitive member nations could still hope to receive a return on their investment in ESA.

In 2016, the current agreement for cooperation between the EU and ESA expires. It remains to be seen what the new agreement will look like. The current signs point at a shift in power toward the EU.

Clemens Rumpf is a researcher at the University of Southampton in the U.K. on the topic of planetary defense. He has previously worked at DLR and Airbus DS in Germany as well as ESA in the Netherlands. This article originally appeared in The Space Review, a SpaceNews affiliate.