“The Economic Impact of Marijuana Legalization in Colorado”

The title of this post is the title of this recent report produced by the Marijuana Policy Group, which describes itself as a “non-affiliated entity dedicated to new market policy and analysis [seeking] to apply research methods rooted in economic theory and statistical applications to inform regulatory policy decisions in the rapidly growing legal medical and recreational marijuana markets.” Here is part of the report’s synopsis:

The Marijuana Policy Group (MPG) has constructed a new model that accurately integrates the legal marijuana industry into Colorado’s overall economy. It is called the “Marijuana Impact Model.”  

Using this model, the MPG finds that legal marijuana activities generated $2.39 billion in state output, and created 18,005 new FullTime-Equivalent (FTE) positions in 2015.  Because the industry is wholly confined within Colorado, spending on marijuana creates more output and employment per dollar spent than 90 percent of Colorado industries….

Legal marijuana demand is projected to grow by 11.3 percent per year through 2020.  This growth is driven by a demand shift away from the black market and by cannabis-specific visitor demand. By 2020, the regulated market in Colorado will become saturated.  Total sales value will peak near $1.52 billion dollars, and state demand will be 215.7 metric tons of flower equivalents by 2020. Market values are diminished somewhat by declining prices and “low-cost, high-THC” products.

In 2015, marijuana was the second largest excise revenue source, with $121 million in combined sales and excise tax revenues.  Marijuana tax revenues were three times larger than alcohol, and 14 percent larger than casino revenues. The MPG projects marijuana tax revenues will eclipse cigarette revenues by 2020, as cigarette sales continue to decline.  Marijuana tax revenues will likely continue increasing as more consumer demand shifts into the taxed adult-use market.

As a first-mover in legal marijuana, the Front Range has witnessed significant business formation and industry agglomeration in marijuana technology (cultivation, sales, manufacturing, and testing).  This has inspired a moniker for Colorado’s Front Range as the “Silicon Valley of Cannabis.”  Secondary marijuana industry activities quantified for the first time in this report include: warehousing, cash-management, security, testing, legal services, and climate engineering for indoor cultivations.