Hard News by Russell Brown


The last – and best – parts of the cannabis bill have arrived

Regular readers will know that I've been hanging out for the "market allocation" parts of the proposed Cannabis Legalisation and Control Bill, which will be the subject of a referendum this year.

While most media outlets ran inane stories last year on how many joints 14 grams added up to, it was clear to anyone who took the subject seriously that the questions of who would get to produce and sell cannabis and how licences would be awarded were vastly more important. And we've had to wait for answers to those.

Well, they're here. And it's very good news. From the summary of the proposed bill (there's a link to the full text at the bottom of the summary):

A cap would limit the amount of cannabis available for sale in the licensed market. Licensed businesses would apply for a portion of the cap. The Authority would be able to adjust the cap each year as required. No licence holder would be able to hold more than 20% of the cap.

The Bill includes 3 guiding principles, which the Authority would apply when deciding which businesses would be given a portion of the cap. The Authority would consider the degree to which the licence applicant:

  • represents or partners with communities disproportionately harmed by cannabis
  • generates social benefit and builds community partnerships
  • promotes employment opportunities and career pathways.

The cap could change over time and affect the amount of cannabis businesses would be able to supply to the market.

Part of the cap would be set aside for micro-cultivators (licensed businesses growing on a small scale).

Businesses allowed to grow cannabis would not be able to operate premises where cannabis is sold or consumed.

Why is this good? Because it effectively cuts off the prospect of Big Cannabis. Canada undermined an otherwise thoughtful set of regulations by allowing its already-large medicinal cannabis businesses to rush into the market, setting off an investment gold rush that was destabilising and unhealthy. California handed out licences to pretty much anyone, but imposed compliance costs so high that they effectively cut out the small producers that legalisation was supposed to bring in from the illicit market: it was pretty much a Big Cannabis charter.

Neither regime has actually ushered in any public health crisis – in both places, as everywhere, legalisation has seen a small increase in overall use by adults and a consistent fall in youth use – but they have both sidelined communities who suffered most under prohibition. Also, we should have already learned the lessons of alcohol and tobacco in allowing large companies to control drug markets – and using their resources to seek political influence. And apart from anything else, "Big Cannabis" is scare messaging for prohibitionists.

A different set of approaches, usually grouped under the heading "social equity", has begun to emerge in some US states, and what we're seeing in this bill is that written into law. It's made even clearer in the explatory notes of the bill itself:

Other provisions of the Act that recognise the interests of Māori in the context of the regulation of cannabis include—

  1. (a)  section 85, which relates to how the amount of licensed cannabis that may be cultivated within the annual cultivation cap may be allocated, and requires the Authority to have regard to applications that realise the following social equity principles:—

    1. (i)  representing or partnering with communities disproportionately harmed by cannabis, including Māori and people from economi- cally deprived areas; and

    1. (ii)  the generation of social benefit and build community partnerships by engaging individuals, whānau, and communities in the design and delivery of their authorised activities; and

    2. (iii)  the promotion of employment opportunities and career pathways in the cannabis industry for Māori and people from economically deprived areas; and

  1. (b)  section 202, which relates to the manner in which the Authority must set the maximum potency limits for licensed cannabis products, and pro- vides that these limits should aim to minimise problematic use, espe- cially for Māori; and

  2. (c)  sections 260 and 263, which require the Crown, when setting the harm reduction levy and excise duties, to have regard to the extent to which the levy and the excise duties share the costs associated with can- nabis use and its regulation in an equitable and non-regressive manner among those who buy, sell and produce cannabis.

Māori communities which have suffered the most harm under cannabis prohibition, will have a head start in getting a stake in a regulated industry and, in general, prospective licencees will need to show their own social merit or miss out. Licences will be limited.

Small producers will also have a reserved stake under the new regime. It would be up to the proposed Cannabis Regulatory Authority to say how much of a permitted annual cap on cultivation would be reserved for holders of micro-cultivation licences. Hopefully, lessons will be learned from Canada's experience with its own "artisan" producer licences.

The bottom line of the section quoted above also embodies a more recent approach: a ban on vertical integration, which has been an element of reform in Mexico. No business will be able to both produce cannabis and sell it to the consumer, which restricts market dominance.

The economist Eric Crampton has already noted that the vertical integration ban would preclude "cellar door" type operations, where a producer could show and sell farm-grown cannabis to visitors (which would undoubtedly be popular with tourists). But I think there are larger impediments to that, most notably in the banket ban on advertising – including advertising inside R20 stores. You won't be able to smell or see your weed – or even a picture of it – just a price list.

It's not clear to me the extent to which even attributes of of the products will be able to be described, to tight is the advertising ban. But the particular effects of any given cannabis strain strain are governed as much by which terpenes are present as by THC level – weed that smells like cheese will have a very different effect to weed that smells like piney or citrusy, believe or or not – and anyone buying it needs some way of knowing that.

Update: it appears that clause 158 g (iii) appears to actually address this, offering an exemption to the advertising ban for:

the following actions of a licence holder who has a retail or consumption premises authorisation if done in the approved premises and in accordance with regulations:

  1. (i)  the giving of advice and recommendations about cannabis products to customers who are inside the premises, including information about the THC content of cannabis products:

  2. (ii)  the display and provision of public health messages or other messages relating to harm reduction by third parties approved by the Authority:

  3. (iii)  the display of a sample of cannabis products within the premises for the purpose of allowing customers to see and handle but not consume the cannabis products available for purchase.

I hope so, otherwise there's a level where this gets infantilising. If we've decided, as a nation, that adults can use this drug, then not letting them see it or get information about it, even on licensed premises, until they've bought it – when they will be free to look at it, smell it and consume it, even right there on the spot – just seems a bit silly.

I suspect that provision has been grandfathered in from smokefree regulations. Ditto for one surprising new part: you'll be able to buy onsite or BYO on suitably licensed premises and consume your cannabis – but there would be no smoking or even vaping indoors. So prospective retailers would need to find premises that were not only discreet and not visible from the street but had large outdoor areas. Rooftop gardens might suddenly become very popular.

You would presumably be able to enjoy edible products. But Justice minister Andrew Little confirmed today that edibles wouldn't initially be permitted for sale – you'd still be allowed to make your own, from weed you've bought or grown yourself. I do get the desire to take it slowly, which will also be behind the exclusion of cannabis extracts and concentrates for the time being.

But cannabis topicals – balms to rub on your sore bits – will also not be allowed at first. And I think that points to a bigger shortcoming: the failure to take into account the green fairy networks, which already deal in extracts and topicals. We're already at a point where police are less likely to prosecute genuine medicinal supply and, if they do, courts are relucant to to convict. Perhaps this group of sub-pharmaceutical therapeutic products needs its own regulations – what Pearl Schomburg proposed in my Herald profile last weekend could be a basis for that – but leaving that community swinging in the wind isn't sensible or compassionate.

Elsewhere, there would be an excise tax linked to THC content, a limit of 15% THC content for whole flower and a requirement for THC and CBD content to be stated on packaging. But it would seem to make sense for other cannabinoids (some of which have emerging therapeutic uses) to be stated on the label – and for CBD levels to be linked to excise rates, with higher-CBD products being treated more favourably.

There's much more in the bill, but it'll take time to go through and I wanted to get this written. Overall, this is what we'd been led to expect: it's a very tight regulatory framework, more so than alcohol or tobacco, and of course much more so than in the current cannabis black market – as befits legislation with a public health goal.

In the event of a "Yes" vote there will be a tension between between the traditional public health approach of taxing and restricting harmful substances and the desire to take the trade away from the criminal market, but a balance should be found.

But for now, I'm absolutely delighted with the licensing and market allocation parts. They have helped confirm this bill as genuinely world-leading legislation that incorporates lessons from other countries and address the needs of our country. We just now need to wait and see whether it ever gets in front of a Parliament that can make it into law.

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