Could the reclassification of cannabis lead to significant reductions in energy consumption by commercial marijuana cultivators and overall improvement in the industry’s environmental impact?
It’s well-known that indoor marijuana cultivation facilities have a major environmental and energy footprint. This is largely due to the massive electricity consumption required for robust HVAC systems, horticultural lighting, and numerous fans and pumps needed to create optimal growing conditions.
Although the exact details of a post-scheduling cannabis industry in the United States are unknown, we can learn from the controlled-environment agriculture (CEA) industry about potential changes in cannabis growing, such as the adoption of less energy-intensive techniques.
Reclassification could unlock a variety of federal programs that are currently inaccessible to cannabis entities due to federal prohibition.
The Biden administration allocated billions for agricultural and clean-energy projects in 2022 through the Inflation Reduction Act. For instance, the U.S. Department of Agriculture (USDA) has, through loan guarantees and grants, helped domestic CEA enterprises install efficient and sustainable energy technologies. These include chillers, heat pumps, LED grow lights, clean-power generation and sophisticated HVAC systems.
The program works better for larger institutions due to the significant administrative effort associated with applying for USDA assistance.
Nonetheless, CEA companies of all sizes can obtain support navigating USDA grant and loan applications from a number of federal grant aid organizations. The IRS provides a 30% investment tax credit for marijuana companies that want to install renewable energy sources, such as solar panels, on their property.
Developers of cultivation facilities sometimes point to the high upfront costs as a primary deterrent to the installation of cutting-edge, energy-efficient machinery. Rescheduling could free operators from the restrictions imposed by Section 280E of the IRS, which levies greater taxes on corporations that handle plants than on conventional enterprises. This might free up funds, allowing numerous operators to modernize their spaces for increased energy efficiency.
As of right now, indoor facilities are not subject to any national codes; however, this could change in the future when the International Energy Conservation Code is updated. States that enforce clean-air vehicle requirements, such as California, may, in the meantime, implement more stringent regulations than those established by the federal government.
In the meanwhile, multistate cannabis companies will have to manage a complicated web of regulations.
The potential reclassification of cannabis presents a great opportunity to make the industry more environmentally sustainable. It’s imperative that marijuana businesses keep up with constantly changing federal regulations and proactively implement clean, energy-efficient technology.
Compared to outdoor farms or traditional greenhouses, indoor agriculture requires a lot more electricity per square foot yet permits year-round production regardless of the weather. In the event that cannabis becomes legally transferable across state lines, growers may decide to move from costly indoor models in the north to more affordable outdoor or greenhouse settings in the South and west.
Although this transition could take decades, shifting production to more naturally conducive areas would significantly lessen the industry’s overall environmental footprint.
As the anticipated regulatory change is still very much in flux, entities such as SNDL Inc. (NASDAQ: SNDL) are likely to observe and later decide how best to leverage the changed regulatory landscape in order to further optimize their operations.
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