Why Energy is Key to the Emerging Cannabis Industry
Often forgotten in the rush to expand the cannabis industry is the environmental impact of indoor cultivation operations and environmental considerations for the engineering and design of cultivation facilities. This article will briefly address environmental impacts of cannabis cultivation, specifically energy usage, in various states and how cultivators looking to the emerging New Jersey market can better equip themselves for potential regulation similar to what is being seen in other states.
Growing cannabis, especially indoors, is energy intensive. It can take upwards of 5,000 kWh to grow just one kilogram of cannabis (2,000 kWh to grow one pound) as compared to roughly 10,000 kWh of energy to power a residence in the United States for a year. Recent reports show the cannabis industry is having a significant impact on the use of electricity in states that have legalized it. In 2015, various reports concluded that cannabis growers accounted for approximately 1.7 percent of the United States’ total electricity usage, a cost of upwards of $6 billion. The vast majority of states that have legalized cannabis cultivation have not addressed the issues surrounding energy consumption prior to enacting legislation. As a result, municipal governments, state agencies and public utilities have had to take a reactive approach to the astronomical utilization of energy.
Currently, states and municipal governments are implementing various techniques in order to curtail electricity use. The techniques vary, but the most common are taxes and/or fees on energy consumption. For example, Boulder County, Colorado has a requirement that growers either offset energy consumption with the use of renewable energy or pay a $0.02 charge per kWh of energy use. In addition, some state regulations have an adverse effect on energy consumption, and compliance results in an increase in energy consumption by growers. For example, when Pennsylvania legalized cannabis in 2016, its regulations required growers to contain their entire crop in indoor facilities without addressing how the state would cope with the corresponding energy use from the requirement.
Though most states have not addresses environmental impacts of cannabis cultivation until after licenses were already awarded, one state has put into place some of the strictest energy regulations for cannabis cultivation.
In 2008, Massachusetts entered into the Global Warming Solutions Act, which required a reduction in the state’s greenhouse gas emissions by 80 percent no later than the year 2050. However, with the legalization of adult-use cannabis, the state had to address the fact that not only is cannabis an energy-hungry crop, but that it also emits dubious amounts of carbon dioxide (CO2). On average, the energy needed to grow one pound of cannabis indoors emits roughly 5,000 pounds of CO2 into the atmosphere. As a result, the Cannabis Control Commission of Massachusetts has included in their regulations a limit on how much energy can be utilized for cultivation operations.
Although New Jersey has not yet weighed in on the energy use and carbon emission issues associated with the emerging cannabis industry in the most recent adult-use cannabis legalization bill, state lawmakers are openly moving New Jersey towards being a leader in climate change solutions, especially with New Jersey rejoining the Regional Greenhouse Gas Initiative. Additionally, broad environmental concern has not completely escaped legislators, as the most recent call for medicinal cannabis licenses required applicants to submit an environmental impact plan as part of the application process.
As a result, it is imperative that cultivators from out of state, as well as those who are thinking of starting a cultivation operation, who wish to apply for licensing in New Jersey, consider the impacts of their future operations regarding electricity use in order to be prepared for any future regulations and/or taxes that might negatively affect their operations and profitability.
This article was originally published on the NJSBA website.
As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.