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Federal Finance Minister Bill Morneau announced a week ago that the price that the provinces and federal government are proposing for legal cannabis is $10 a gram including a federal excise tax of $1 or 10 per cent, whichever is higher. (Joe Mahoney/The Canadian Press)
Federal Finance Minister Bill Morneau announced a week ago that the price that the provinces and federal government are proposing for legal cannabis is $10 a gram including a federal excise tax of $1 or 10 per cent, whichever is higher. (Joe Mahoney/The Canadian Press)

Street cost for cannabis lower than legal price point, Statscan finds Add to ...

Statistics Canada has published new data on the street value for cannabis showing it could cost at least 13 per cent less than the proposed legal price.

The price point will be crucial as nearly a century of prohibition ends: While some people may be willing to pay a slight markup for the quality and security of the legal product, others may opt for the cheaper, underground supply, especially if they are already used to buying it that way.

Federal Finance Minister Bill Morneau announced a week ago that the price that the provinces and federal government are proposing for legal cannabis is $10 a gram including a federal excise tax of $1 or 10 per cent, whichever is higher.

That would make legal cannabis considerably higher than the $8.84 per gram a Statscan report released on Monday found people were willing to pay on the black market in 2015.

That study found Canada’s underground cannabis trade was worth as much as $6.2-billion in 2015 – almost as much as the legal wine market. The report assumed a price range of $7.14 to $8.84 a gram to determine the market would have represented around 70 per cent to 90 per cent of the size of the $7-billion wine market in the most recent year Statscan analyzed. Meanwhile, PriceOfWeed.com, the crowdsourcing site Statscan plans to use to help it figure out how much cannabis costs on street corners, currently pegs the average gram of “high quality” dried cannabis at $7.56, based on almost 10,000 submissions over the past seven years.

Vancouver Councillor Kerry Jang, co-chair of B.C.’s provincial-municipal committee in charge of crafting the province’s cannabis rules, said the Statscan report underscores how the federal government should lower its proposed cost of $10 a gram or risk letting the underground trade continue to flourish.

“Whether [illegal cannabis] is a dollar or two [cheaper], in this day and age people will always look for the best price, so why increase the risk?” said Dr. Jang, architect of Vancouver’s landmark cannabis dispensary bylaw. “Where Ottawa came up with that $10 we have no clue.

“It was a surprise, it was probably a bunch of politicians trying to figure out how much money they can make or get without actually doing the research.”

Neil Boyd, head of Simon Fraser University’s criminology school and a scholar of drug prohibition, said most recreational cannabis consumers are likely to pay more for this legal supply, which could offer more products than their street dealer plus an official guarantee of product safety from a federal testing regime as well as national labelling standards.

However, any added charges could make the legal supply less palatable for consumers, Mr. Boyd said.

“At some point there’s a tipping point, where that tipping point is precisely I’m not sure,” he said. “But I’m pretty confident that the government is not going to allow itself to get usurped by the black market – they’re going to be careful about how they set the price.”

Last month, B.C. Premier John Horgan warned cities they can’t gouge cannabis businesses with licensing fees if the province wants to squeeze out the sizable black market once the drug becomes legal.

Spokespeople for the federal Justice Minister and Liberal MP Bill Blair, a former Toronto police chief and the Trudeau government’s point man on legalizing cannabis, were unavailable for comment Monday afternoon.

Statscan has tentative plans to do four special household surveys in 2018 asking consumers of black-market cannabis about their habits. The agency told The Globe and Mail that longer-term, community studies would be a good idea, but its limited budget does not allow for them at this time.

In its new report, the agency estimated cannabis consumption in 2015 totalled 697.5 tonnes. It said the number of cannabis consumers and the volume of consumption need to be approached cautiously because there are unquantified degrees of uncertainty in the data.

With a report from The Canadian Press

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Federal government strikes deal with provinces to share marijuana tax revenue (The Canadian Press)

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