The Black Market

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It comes as no surprise to anyone that Canadians consume a heck of a lot of weed. The government estimates that in 2017, 4.9 million Canadians spent over an estimated $5.5 billion on cannabis, consuming 773.4 tons at an average price of $7.15 a gram.

Over 90% of this was non-medical - in other words, illegal - consumption.

This black-market cannabis is produced across the country by households for personal use, designated medical growers with excess product and by grow-ops of varying size and sophistication, and is distributed through vast, decentralized networks of friends & family, dealers, brokers, and dispensaries.

Canada is also a significant net exporter of its illicit cannabis, with over 20% of total production exported in 2017 at an estimated $1.2 billion in value.

British Columbia has long played a unique and renowned role in Canada’s cannabis black market.

From the 1960s draft-dodgers from America’s West Coast migrated north, discovering British Columbia’s fertile land and ideal microclimates for the cultivation of cannabis. With limited policing against growers and an influx of anti-establishment settlers, ‘BC Bud’ - a term first used for a US prohibition-era beer smuggled in vast quantities south across the border - become synonymous with the province’s plentiful and high-quality cannabis.

Decades on, despite increased enforcement and the advent of a national medical-use industry the brand has endured, resulting in a province with a taste and a tolerance for cannabis, and a concentration of experience, knowledge, passion and skill amongst the provinces’ many, still largely illicit, growers.

Consumption

British Columbians are markedly canna-curious, with 20% of citizens having consumed cannabis in the last three months, against a national average of 15%.

This represents an estimated 725,000 cannabis users consuming in the region of 91 metric tons a year and spending more than $830 million in the process. BC is beaten only by Nova Scotia in per capita cannabis consumption, which at 24.6 grams per year is more than 15% higher than the national average.

Unsurprisingly given BC’s long relationship with cannabis, only 7.9% of product consumed in the province was obtained with a medical document in 2017, placing 92% of BC’s cannabis consumption from the black market.

Production

British Columbia is Canada’s chief cultivator of cannabis, accounting for 100% of in-province consumption and 36.6% of the nation’s total cannabis production.

The exact size of BC’s (predominantly illicit) cannabis market is not easily quantified, though estimates place it at between $2 to $7 billion. With experimental modelling, Statistics Canada pegs the 2017 retail value of BC’s total cannabis market at over $2.25 billion.

Although conservative by other estimates, this figure makes BC’s black-market cannabis market three times larger than the provinces’ greenhouse industry, 50% bigger than BC’s farmed salmon industry, and three-quarters of the size of the province’s film and TV production industry.

According to Statistics Canada’s estimates, 37% of BC’s cannabis is consumed in-province, and just over a quarter is sold to other provinces. The remaining 35% is sold illegally abroad.

With BC cannabis exports valued at nearly $800 million last year, the province accounts for three-quarters of Canada’s international cannabis trafficking, and exports more illegal cannabis to the world than it does salmon. However, alternative studies place the volume and financial value of BC’s black market cannabis exports significantly higher still.

Microdata

Black market BC cannabis growing operations have grown in both size and sophistication since the 1990s, following a shift in production from outdoor grows to predominantly indoor operations.

Studies using data from BC Hydro suggest that there are over 13,000 active commercial indoor cannabis operations in BC. These represent the largest source of BC’s black market cannabis and are supplemented with product from outdoor grows and unlicensed personal cultivation.

An alternative measure using the number of Colorado’s cannabis jobs as a proxy suggests that BC’s black-market cannabis industry supports an estimated 13,700 jobs across the province with wages in excess of $600 million. These jobs include growing, processing and the production of items such as oils and edibles, along with further employment in ancillary industries as diverse as retail, management, marketing, and legal services. The vast majority of these jobs also pay significantly higher than the BC minimum wage of $12.65.

Shades of Grey

British Columbia’s billion-dollar, black market industry can be understood in a number of ways.

By one interpretation, BC’s thousands of grow-ops and international trafficking operations represent a dangerous and harmful criminal enterprise.

There are undeniable social, health, and criminal costs associated with the illegal production of cannabis. Cannabis is the most trafficked drug in the world, with illegal trade reportedly contributing $7 billion to organized crime in Canada alone. And of the 650+ organized crime groups operating in Canada, over half are known or suspected to be involved in the cannabis black market.

Black market cannabis is frequently grown in properties ill-suited and inappropriately fitted for horticultural use. A lack of safety regulation and high electricity use contribute to increased fire risks, alongside other concerns such as the theft of utilities, contamination of water, poor ventilation, and local disturbance. Black market products are unregulated, with zero safeguards for the accurate reporting of cannabinoid levels, or the testing of mould, pesticides, and other contaminants. Black market growers can also generate significant levels of illicit, untaxed revenue, which is then further obscured through additional channels to avoid detection.

However, others challenge an unequivocally negative portrayal of BC’s cannabis production. Claims that the industry is dominated by organized crime have been criticized as unsubstantiated and misleading, and there is little evidence of an established criminal hierarchy of cannabis distribution in Canada or more than isolated instances of threat within the industry.

To the residents of towns like Nelson in the Kootenays region of BC, the unlicensed cannabis industry is seen in a very different light. In these rural, predominantly agricultural areas, cannabis production can serve as a valuable economic driver, supporting jobs and opportunity in communities where traditional industries like lumber and mining have declined.

In these regions, cannabis cultivation offers well-paid jobs with flexible hours and profits returned to the community. Cannabis-related business can account for an estimated 15% - 30% of such local economies, providing income for growers and their employees, ancillary industries such as dispensaries and equipment suppliers, and other local sectors such as retail, restaurants, and real estate. In the words of a city councillor from Nelson, hub of the Kootenays' weed industry, cannabis’ contribution to the local economy "just can't be overstated”.

While the cultivation and sale of unlicensed cannabis is federally illegal, many of BC’s industry has operated in somewhat of a legal grey-area - perhaps growing cannabis legally as one of BC’s 4,150 designated growers and selling excess product to friends or dispensaries - or as a tax-paying, registered enterprise producing unlicensed products such as edibles or vape pens. Cities such as Vancouver and Victoria have recognized the significant role of cannabis within their communities, issuing pre-legalisation business licenses to certain dispensaries that, while still federally illegal, comply with specific local stipulations.

Conclusion

There is no single, ‘correct’ interpretation of BC’s cannabis black market. It is diverse and multifaceted, encompassing opportunists, profiteers, and career criminals as well as entrepreneurs, activists, and educators.

Regardless of one’s interpretation, the federal legislation of cannabis represents a once-in-a-lifetime opportunity to transition BC’s $2bn+ industry from the criminal to the legal, and to build legitimacy and opportunity for those who embrace the new, regulated market.

The crucial question for the province is how best to do so - how to eliminate continued, wilfully criminal activity while generating new jobs and innovation, a source of taxable income, and a high-quality product - BC Cannabis - that is so rightfully known throughout Canada and across the world.

Words by Charlotte Bowyer of Hanway and Associates.