Canada’s cannabis lessons could instruct Pennsylvania’s process

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(The Center Square) — It’s not just Pennsylvania’s nearby states that have greenlit recreational marijuana and offered a glimpse at the challenges that could lie ahead for the commonwealth.

Canada, too, legalized marijuana five years ago. Though legal and economic differences remain, Canada’s experience could inform policymakers on what to expect in the future — whether cannabis remains off-limits or gains legal status.

After a half-decade of growth, Canada has seen some growing pains: unstable businesses, an illicit market that hasn’t disappeared, and limited knowledge on legalization’s impact on social problems.

Yet, it has also seen tax revenues and economic growth, better product testing, and public acceptance since the country legalized it in 2018. The federal government sets standards for growth, processing, and licensing of marijuana, while provinces control distribution. Most provinces, but not all, created a provincial wholesaler, which serves as the entity between retail stores and producers.

There’s a federal tax that applies nationwide, and provinces also set an additional tax rate on sales.

“In general, I think we’ve gotten it right,” Brad Poulos, an instructor at Toronto Metropolitan University, said. “They have collected now tens of billions in taxes. This is an industry that previously wasn’t being taxed.”

The cannabis market was estimated at about $6 billion upon legalization, which has grown to almost $11 billion in 2023, though it has recently declined, according to Statistics Canada.

Canadian provinces have tried different approaches; Ontario has a provincially-run distributor like with alcohol, but a competitive retail market. Quebec has government-run stores, prohibits growing it at home, and bans public use. British Columbia has a hybrid approach of government and private retail stores.

The different approaches also mean different problems. Quebec, Poulos noted, has a stronger illicit market compared to a province like Ontario.

Publicly, politicians advocated for legalization to limit youth access and to restrain organized crime, Poulos said.

Statistics Canada noted that use among 15-to-17-year-olds did not increase with legalization, but 18-to-24-year-olds use cannabis most commonly. Generally, cannabis use increased after legalization.

Tallying the benefits and the costs systematically has been difficult. The Canadian government has yet to follow through on a planned assessment of the industry after legalization. And the illicit market has yet to go away. Statistics Canada estimates about 70% of cannabis comes through official stores, but it’s by no means the dominant way.

Ontario, with about 14 million people, has licenses for about 1,500 legal stores, Poulos said. Quebec, about 8 million people, only has 100.

“They’ve got nowhere near sustained coverage,” Poulos said. “That creates an opportunity for the illicit market to fill those holes.”

Growing pains may also be an issue: some provinces have over-expanded their market, sparking a “classic boom and bust” for the industry.

The successes and problems mirror the American experience across different states. New Jersey has had similar issues with a dearth of stores limiting expansion of the legal market. Too-high tax rates, as has been seen in California and proposed in Pennsylvania, has also preserved the illicit market. New York has had a months-long business licensing problem that’s caused headaches.

Other concerns about product safety and a lack of testing, has been less of a concern in Canada, where all legal products get tested at the federal level.

The federal-state divide in America also complicates the landscape. For hemp farmers who also grow marijuana for sale in-state, the U.S. Department of Agriculture threatens to pull their hemp licenses.

In Pennsylvania, legislators hesitant to endorse legalization have focused on youth usage rates and product safety; though Canada’s experience may assuage some of those concerns, it may fall short on others. As Ohio plans its impending legalization, Pennsylvania could learn from similar safety questions at hand.

“There’s no lethal amount of cannabis, but there certainly is a lethal amount of vodka,” Poulos said.

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