June 1, 2018
How much will legalized pot cost? Cannabis legalization and how it will affect our governments, our laws, and our way of life
In 2015, the federal government announced it was going to legalize cannabis. Some of the reasons were to regulate cannabis and restrict access, to eliminate the black market, to ease the burden on the courts, to reduce the number of criminal records, and to tax production and sale.
Other levels of government were left wondering how they were going to handle such a huge social change. Legalization involves more than simply changing laws. It means implementing an entirely new production, distribution and regulatory system for a product that used to be illegal, and then dealing with the social consequences.
For the average person, legalization means navigating a new regulatory regime involving everything from retail licensing to driving to where cannabis can be consumed.
In Alberta, the provincial government approached UCalgary's Health Technology Assessment (HTA) Unit, part of the O'Brien Institute for Public Health in the Cumming School of Medicine. The HTA unit evaluates things like new processes, technologies and systems in health care, and makes policy recommendations to the government.
"They said, 'we need all the evidence you can possibly give us to help us make this policy,'" says Dr. Fiona Clement, PhD, director of the HTA unit.
Over several months, Clement's team compiled all the information they could find into a 286-page report called Cannabis evidence series: an evidence synthesis. The report looked at everything from the current landscape to health issues to what happened in other jurisdictions that legalized cannabis.
"We started with a list of questions we thought the government needs answers to," says Clement. "'What are other jurisdictions doing, and how is it working out for them?' 'How do they compare to Canada?' 'What are the health risks?' 'What are the regulations for producers and sellers?' 'What about advertising?' 'How much should it cost?'"
The last question about cost may seem less important than other considerations. But if part of the rationale for legalization is to wipe out the black market, then legal retailers need to be competitive on price. Charge too much, and users will continue to buy from their current sources. Charge too little, and the government risks being unable to cover the significant costs that come with legalization.
"Finding the optimal price point to switch people away from the black market is a balancing act," says Clement. "Legal cannabis is probably going to cost more than on the black market. Maybe people would pay a dollar more per gram, but would they pay ten dollars more per gram?"
Clement says it's hard to accurately gauge the market value of an illicit product. "The government doesn't have a good handle on the cost of cannabis in the illegal market," she says. "It's also not the same market in each province."
Legalize it – and tax it
Taxing cannabis is one of the major reasons for legalization. But other places that have legalized it haven't seen huge increases in revenue – partly because of taxation structures, partly because of administrative costs, partly because there wasn't a huge increase in the market after legalization.
"There is a lot of profit in legal cannabis," says Clement. "But in the U.S. models, they're not seeing a lot of that coming back to the state governments. They're just covering their costs."
Clement says weaker-than-expected revenues are consistent, despite differences in taxation in each jurisdiction. "There's a lot of variation in where and how much they're taxing in the production-to-sales chain," she says. "Whether they're taxing the producer, the distributor, or the consumer."
While legalized cannabis promises to provide a lucrative market, it comes with heavy administrative costs. "People don't think about how much administrative effort has to go into this," says Clement. "To do this properly, we need seed-to-sale tracking systems. Production facilities have to be inspected and held to standards. There have to be criminal checks for all their employees. There has to be a licensing system to process and register who can produce and who can sell. None of that is cheap."
On top of administration costs, Clement points to more burdens placed on health care and social services. "I hope we'll see increased funding for support services for people who struggle with their substance use," she says. "Also, public health promotions and materials, things like that. We need dedicated funding and resources."
Challenges versus opportunities
While legalization is unlikely to happen without obstacles and roadblocks, it's also going to provide a wide range of opportunities. Even if legalized cannabis is simply a break-even proposition for the government, the economic possibilities are tantalizing. Aside from the domestic retail market, there's a burgeoning production industry that could create thousands of new jobs.
"Alberta is emerging as a global producer of cannabis," says Clement. "We're seeing big players moving in and large new facilities being built." With new facilities come new employment opportunities. "Think of the range of skills such a facility would need. They need everyone from people who can set up tracking systems, IT, security, human resources managers and the horticulturists who actually care for the plants."
Reducing the number of cannabis-related criminal records is another spinoff benefit of legalization with possible economic benefits, at least for individuals. "A criminal record limits your ability to live a full life," says Clement. "You can't travel, there are jobs you can't have, you can't volunteer with your kids because you were caught with a bit of pot when you were 19. There's a feeling that that's not the right punishment."
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When policy becomes law
Once policy recommendations have been tabled, lawmakers have to put them into practice with legislation. In a file as complicated and far-reaching as cannabis, there can be confusion over which level of government is responsible for what. Each level of government more or less has to wait for the one before in order to develop their own laws and regulations.
"There are very few legal issues where you have laws being passed at the federal, provincial and municipal levels," says Lorian Hardcastle, an assistant professor in UCalgary's Faculty of Law and a member of the O'Brien Institute for Public Health. "Now that the federal strategy is developed, each of the provinces roll out their own approaches, and then the municipalities respond with their own laws."
The result is a patchwork of laws and bylaws across the country, with each jurisdiction having its own variations. While federal laws deal with criminal offences and regulating production, provinces have jurisdiction over things like licensing retailers, age of consumption, and where and when cannabis can be sold. Municipalities deal with issues related to things like zoning and where cannabis can be consumed. Each jurisdiction also has the option to strengthen some of the previous level's laws, for example if a city tightens restrictions around provincial rules.
For Hardcastle, legal differences across provinces and municipalities represent an unprecedented opportunity for research. "Some provinces are regulating cannabis like alcohol in terms of where it can be consumed, while others are regulating it like tobacco," she says. "And we'll be able to compare them. For example, cannabis will be available much later at night in Alberta than in Ontario. In Alberta, privatized stores will be open until two a.m. Ontario will sell it in provincial stores the way they sell alcohol, so there won't be stores open until two a.m. Does this mean we'll see more impaired driving related to cannabis in Alberta? Maybe, maybe not."
Other areas of the law that will be affected by legalization include occupational health and safety, landlord and tenant, and food safety laws. While the federal government has said it's holding off on regulating the production and sale of edible cannabis products, that will eventually add another layer of complexity. "With edibles you have not just a drug or a controlled substance, but then you also have the food side of things," says Hardcastle. "The government regulates food and drugs and edibles are both."
Hardcastle points to U.S. states that did not regulate edibles and says we can learn from those jurisdictions. "In the states that just let it happen, there was a lot of misinformation about edibles being reported," she says. "People were eating them and feeling nothing, because edibles take longer to kick in, so they would eat some more. And it would hit them all at once.
"You can't overdose on cannabis the same way you can on other drugs, but what if you think you're fine and you get in a car? What if you leave edible gummy bears out and little kids get into them? Those are issues with legal implications."
From a legal standpoint, legalization will provide a way to get information out and help the government get a better handle on what's really going on, so we can address health and public safety issues. "By legalizing instead of turning a blind eye, we can guard against problem areas," says Hardcastle. "We can get better data and evidence. We can know what's happening. Who's consuming, how much they're consuming, where they're consuming. With seed-to-sale tracking, we also know who's producing and where it's going."
Cannabis and campus life
At UCalgary, the notion of getting better data and evidence on cannabis is driving a campus-wide study that began this year. A cross-disciplinary group of researchers developed a survey, called UCalgary Campus Experience with Cannabis, which was sent to 4,000 students. The idea is to explore students' experiences with cannabis, and to identify problem areas and gaps in services. A parallel study is planned in partnership with the University of Alberta, with the idea being to merge the two data sets for a more complete picture.
After legalization, phase two of the project will follow up to see what's changed, and phase three is to expand the survey to other universities across Canada. The intention is to provide a way for leaders and lawmakers to make informed decisions about policies and laws in the future.
"We wanted to measure pre-legalization and establish a baseline," says Dr. Jacqueline Smith, PhD, an assistant professor in UCalgary's Faculty of Nursing and the principal investigator on the study. "Canadian youth have the highest rates of cannabis use in the western world. We want to look at prevalence rates, predictors of use, protective factors, social stigma and service needs."
"There's a general sense that it's a relatively harmless substance," says Joel Mader, a research associate to Smith. "We want to understand how students perceive risk, if they think there are negatives associated with regular use, will they actually reach out to available support services, or are there any other methods we could offer if they start to experience problems."
By surveying students before and after legalization, the researchers hope to be able to assess whether usage rates increase as cannabis use becomes more socially acceptable. "Research has shown that as perceived risk goes down, usage rates may go up," says Smith. "We're curious to see what happens here on campus."
If legalization makes cannabis seem less risky, will it also make it more likely students will seek help when they feel they have a problem with it?
"Addictions and substance abuse are highly stigmatized compared to other mental health problems," says Dr. Andrew Szeto, PhD, an assistant professor in UCalgary's Department of Psychology and director of the Campus Mental Health Strategy. "There is very little research on the stigma related to cannabis. We want to assess the relationship between stigma and seeking help. We don't have that data."
Opening up about cannabis and risks
The criminalization of cannabis has made it difficult to study, in part because it's hard to get funding and approval, and in part because people are less likely to be honest about their behaviour when it's illegal. "There's a lot of ethical red tape in order to explore an illicit substance," says Smith. "And you get compromised disclosure."
If one of the reasons for legalization is to reduce the potential for harm to youth, then we need to understand how they're using cannabis and their attitudes about it. "What's really important is that we're opening up the conversation," says Smith. "We know Canadian youth are using it more than the rest of the world, so let's talk about that. Let's educate them about the risks."
Now that legalization is here, Mader, Smith and Szeto expect students will be more forthcoming about their views and their habits, which will make it easier to determine what's actually happening and where the discrepancies are.
"We want to focus on general attitudes toward cannabis use and expectancies," says Mader. "If you think cannabis is going to have a positive effect, does that influence your choice to use it? We also want to look at impulsive decision making, gender, age, and other important factors that are predictors of use."
"We're taking a public health approach," says Szeto. "If we just say, 'no, no, no,' people are going to do it anyway. And then there's no way to control it or to reduce harms."
Because Canada is only the second country to legalize cannabis (after Uruguay), the study can help inform other jurisdictions that are considering legalization. "We're thinking about this as a national study," says Mader. "But it has international implications as well, for other countries to see what happened in Canada, what are some of the benefits of legalization, and what are some of the negatives you might want to consider ahead of time."
Change is possible
One of the examples Canada is setting for other jurisdictions is that massive social change is possible in a short period of time. "Unlike most files I've seen, this one is moving really fast," says Clement. "And we're more or less ready for it. It shows that under the right conditions, with proper resources, a country can legislate policy change rapidly. This is one of those moments that defines Canada as forward-thinking leaders. I'm proud of the policies that have been tabled."
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ABOUT OUR EXPERTS
Dr. Fiona Clement, PhD, is an assistant professor in the Cumming School of Medicine and the director of the Health Technology Assessment Unit in the O'Brien Institute for Public Health. Her research interests include drug and non-drug technology reimbursement and cost containment policy, and evidence in decision-making and health policy development. Read more about Fiona
Lorian Hardcastle is an assistant professor in UCalgary's Faculty of Law. She is also a member of the O’Brien Institute for Public Health and the Conjoint Health Research Ethics Board. Lorian's research interests focus on regulation and governance of the health care system, hospital and governmental liability and accountability, patient safety, health system organization and finance, comparative health policy, and the self-regulation of health professionals. Read more about Lorian
Dr. Jacqueline Smith, PhD, is an assistant professor in UCalgary's Faculty of Nursing. Her research interests include family, addiction and mental health, middle school drug and alcohol education, and post-secondary education programs and policies for safe alcohol and substance use. Read more about Jacqueline
Dr. Andrew Szeto, PhD, is an assistant professor in UCalgary's Department of Psychology and director of the Campus Mental Health Strategy. Beyond the implementation of the 28 recommendations of the Campus Mental Health Strategy, Andrew’s research includes the use of social psychological approaches to the examination of mental illness stigma and the development and evaluation of stigma reduction and mental health programming in the workplaces, first responders, and in post-secondary institutions. Read more about Andrew