Canada's Cannabis Act

On June 19, Canada’s Senate passed the Cannabis Act. Beginning on October 17, Canadians over the age of 18 will be permitted to carry up to 30 grams of marijuana in public and grow up to four plants at home. Cannabis retailers will be allowed to operate, subject to federal, provincial, and territorial regulations and taxation. Cannabis concentrates and edibles will be available about a year later.

That makes Canada only the second country, after Uruguay, to fully legalize marijuana. Supporters of the new law, including Prime Minister Justin Trudeau, claim that it will reduce underage drug use, eliminate illicit dealing, and lessen the harms of arrest and prosecution, while providing substantial tax revenue. How likely is it that Canada will achieve those objectives, and what are the risks of legalization?

Canadian officials can learn from both U.S. successes and U.S. mistakes as they try to design tax, regulatory, enforcement, and public health measures in order to reap the benefits of legal marijuana while managing the very real risks. There are now years of evidence from the United States—where states such as Colorado, Oregon, and Washington have replaced prohibition with regulation—about the impact of legal marijuana on markets, revenues, and public health. (In the United States, cannabis remains banned by federal law, thus preventing the creation of national-level legal producers.)

The experience of legalization in the United States shows that prices will be low. Low prices, combined with ease of access and aggressive marketing, create a threat to public health by stimulating “problem use.” Legal marijuana will eventually crowd out illegal marijuana, but enforcement measures against the illegal product are necessary in the short term. Tax revenues are likely to be modest, and the tax system under the Cannabis Act creates an unwanted incentive to increase potency.