Extractions & THC Limits

Like British Columbia, California has had a grassroots cannabis industry evolve from the legal medical regime. A grey market now threatened, ironically, by legalization which poses to serve a top few insiders at the expense of everyone else.

Governor Jerry Brown’s signing of Assembly Bill AB 2679 aims to protect butane and carbon dioxide extraction crews from getting arrested and prosecuted under laws designed for meth labs.

The goal is to bring an “unregulated” industry under more traditional means of control, ensuring patients have access to quality and consistent products.

Whether AB 2679 will actually do this remains to be seen. But, in the meantime, many see it as a step in the right direction.

In contrast to Canadian law, where extraction methods were deemed dangerous and illegal until patients took the issue to a federal court.

Only after a lengthy and costly legal battle were Canadian patients allowed to medicate by means other than smoking or vaping.

But the battle is far from over, as the government discussion paper, “Toward the Legalization, Regulation and Restriction of Access to Marijuana,” clearly states:

“Various higher potency marijuana products such as “shatter” are available with THC concentrations reaching levels as high as 80-90%… higher concentration products have added risks and unknown long term impacts… Given the significant health risks, maximum THC limits could be set and high-potency products strictly prohibited.”

But, like everything the government does, the remedy is often worse than the disease. Especially in this case where high-THC products, even in the hands of children, are far from deadly.

If the government sets a legal maximum on THC content, the idea is that rising THC content will hit a “ceiling” and will not go any higher.

If consumers are demonstrating their preference for, say, a cannabis strain with 27 per cent THC, then we can consider this the “market content.”

A THC cap, then, will be set below this market content. However, when production and prices aren’t interfered with, prices tend to close at the market-clearing price, which is the price where the quantity supplied equals the quantity demanded.

If the government forces THC content lower by imposing a THC cap, it could cause a shortage of cannabis.

Suppose the THC content of 27 per cent is the equilibrium amount found in cannabis in a free and fair market. At that level, consumers want to buy, say, a total of 100 grams and producers want to sell 100 grams.

The market clears and everyone is happy.

But then the government imposes a THC cap at 12 per cent, threatening to fine and imprison anyone caught selling high-potency cannabis.

At the lower THC level, the quantity of grams demanded rises to 120, while the quantity supplied drops to 90. There is now a shortage of 30 grams.

The physical amount of cannabis doesn’t shrink, but the amount of cannabis producers are willing to sell can drop because of the new THC content law. Producers growing and selling strains at 27 per cent might refrain if they can only legally produce an inferior 12 per cent.

It’s the same analysis used in price ceilings. If the government capped the price of any good or service at an arbitrary lower amount, the result would be shortages.

Arbitrary tinkering with THC content could give similar results.

An undisturbed market price rations the available supply of cannabis among the competing demands for it. By placing a cap on THC, the government isn’t eliminating the “unknown long term impacts” but exacerbating them.

There are still people who want high-potency cannabis, but now, they must either smoke more to achieve the same effect, risk making an extract themselves, or risk purchasing from a black market created by government intervention.

In an effort to protect “young people, including children,” the federal government is punishing adults for preferring high-potency cannabis.

And based on what?  “Unknown long term impacts” that magically translates into “significant health risks.”

There is no logic here. The Canadian government would be wise to follow California’s example and write the existing extraction industry into law.

As Cannabis Growers of Canada executive director Ian Dawkins said,  “If you know anything about dispensaries you know that around 50 per cent of the cannabis being sold right now in a retail environment is concentrates, so apparently they [the government] just think $3 billion worth of business is just going to disappear overnight.”