Highs and lows of cannabis cost report


The New Zealand Institute of Economic Research says legalisation of cannabis could bring new opportunities for New Zealand to research the medicinal use of marijuana.



Dr Chris Wilkins from the SHORE and Whāriki Research Centre.

The latest New Zealand Institute of Economic Research (NZIER) report, The high cost of (not) stopping people getting high, identifies a number of tantalising commercial opportunities if cannabis is legalised, says Massey University’s Dr Chris Wilkins.

The report proposes legalising and taxing cannabis drawing on recent experience with legal markets in Colorado. It raises a number of arguments in favour of a legal cannabis market including reduction in spending on cannabis enforcement (estimated to be $300 million per year based on Treasury documents), collection of cannabis tax income, and opportunities for the research of the medicinal properties of cannabis and expansion of related commercial activity.

Dr Chris Wilkins, a leading drug researcher from the College of Health’s SHORE and Whāriki Research Centre says, “there is a need for careful and considered examination of all the regulatory options available before considering the adoption of a large scale commercial retail market like alcohol and tobacco, including ‘de-penalisation’, ‘decriminalisation’ and ‘small scale non-commercial approaches’, such as cannabis social clubs.

“Recent experience with the Psychoactive Substances Act for legal highs showed us once again, ‘the devil is in the detail’. Even when a preferred approach is developed, the success of the new policy relies on effective and careful implementation.”

Dr Wilkins says, as the NZIER concede, their report does not examine all these future policy options and provides only a limited summary of the literature.

Early days

“There are significant gaps in the current evidence base and many unknowns about the future impact of a legal cannabis market. The Colorado market has only been operating for two years. It is too early to assess important medium-term impacts on use levels, initiation by young people, levels of dependency, and vehicle safety.

“It is also too early to assess the effectiveness of regulation designed to limit access to young people, control consumption, maintain high prices, and limit the influence of the industry.”

Dr Wilkins says current modelling suggests the main economic benefits from legalising cannabis are not savings from cannabis enforcement, which are much lower than commonly thought, but earnings from the taxation of cannabis products.

“However, this tax revenue could be significantly eroded over time by falling cannabis prices once the legal industry delivers a range of efficiency gains based on economies of scale. While the legalisation of cannabis would be an economic setback to organised crime, they [dealers] could continue to supply a significant part of the market by selling to underage users and those unwilling to pay for higher priced, taxed cannabis.”

Making cannabis safer

Dr Wilkins agrees with the NZIER, who note there are opportunities to produce safer cannabis products under a regulated approach, including removing impurities and setting maximum limits on levels of tetrahydrocannabinol (THC - the main mind-altering ingredient found in the cannabis plant) and minimum limits on cannabidiol (CBD - the anti-psychotic ingredient of cannabis).

“There are also opportunities to promote healthier ways of taking cannabis, including vaping and the ingestion of edibles, and to promote healthier social norms and understanding of risks among users.”

Click here to read the full NZIER report The High Cost of (Not) Stopping People Getting High.

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