One of the leading arguments for the legalization of cannabis is the tax revenue a state can generate. Unfortunately for Colorado, instead of generating the predicted $33.5 million tax revenue, they only generated $12 million, a shortfall of $21.5 million.
The main reason for the shortfall is that recreational cannabis is far too expensive for some and the reason it is too expensive is a combination of high taxes and low supply. In order to help increase the supply, and ease the price of cannabis, Colorado regulators have proposed new cultivation rules, which were met with cheers by some and jeers by others.
At the heart of the new rules are changes to production caps. Initially, production caps were introduced to keep the market from overproducing cannabis. Regulators feared that too much cannabis would not only bottom-out prices, but cause surplus to find its way into other states and endanger the already tenuous legal status of cannabis.
The production caps were set up before Colorado legalized recreational cannabis. The caps were in proportion to how many medical marijuana patients the grower serviced. Once recreational marijuana became legal, the caps more or less stayed the same, which resulted in the supply crisis we have now.
The new rules propose a path for increasing production. While the original production caps are essentially still in place, you may add more plants to your production if you can prove that you have sold 85 percent of your inventory. The proposed rules also allow warehouse production to increase to 3,600 plants.
Newcomers to the industry have criticized the proposed rules and have claimed that they are designed to favor vested interests in the industry and discourage newcomers. At the heart of the issue is the disparity between greenhouse growers and warehouse growers. Running a warehouse grow operation is far more expensive than a greenhouse operation. By raising the production cap for warehouses and leaving greenhouse growers out, you give those with deeper pockets an advantage over first time growers.
Others in the industry have criticized the new production rules for environmental reasons. Cannabis greenhouse consultant Greg Duran voiced his concern to Rocky Mountain PBS News. “This is completely against what we need to do. We need to make the leap from being inside and use greenhouse techniques to reduce the light we have to use, reduce water, reduce costs,” Duran said.
Indoor cannabis cultivation is indeed a highly expensive and environmentally intense process. In 2012, Colorado cannabis production accounted for one percent of US energy consumption, costing $6 billion. Greenhouses are comparatively cheaper to set up, they are friendlier to the environment and they often yield larger crops.
Although the proposed production rules have been approved temporarily, they will not be finalized until the head of the Colorado Department of Revenue, Barbara Brohl, approves or denies the changes. Currently, there is no set deadline for Brohl’s decision.
source: The Cannabist