How Will Cultivators, Governments and Market Forces Shape Industry Sustainability?

How Will Cultivators, Governments and Market Forces Shape Industry Sustainability?

Sam Milton of Climate Resources Group analyzes energy, water and waste management and how growers can do their part to be more resource-efficient.

March 9, 2018

What do cars, aluminum cans, salad greens and cannabis have in common?

They are products whose production and/or use may have a harmful impact on local and regional resources, whether it be water, clean air, energy or land. But through a combination of both regulatory and market forces, cars have become safer and more fuel-efficient, many tons of aluminum cans are recycled each year and the organic label has driven a massive market for pesticide- and chemical-free foods. Will the cannabis industry witness a similar evolution?

The extent to which the legal cannabis industry embraces sustainability remains to be seen. But while there is a clear public interest in protecting those resources (and I argue there is), the questions for the legal cannabis industry are: 

• What are the industry’s responsibilities toward these public resources? 

• What is the role of government regulation in containing impacts? 

• And to what extent can or should the industry rely on market forces to help it self-regulate?

What does the “greater good” mean for the cannabis industry?

Most people would agree that it is in public interest to minimize any industry’s impact on local and regional resources. And like it or not, cannabis cultivation can be a very resource-intensive industry— cannabis plants are notoriously thirsty, indoor cultivation requires enormous amounts of electricity and large-scale cultivation facilities can create significant amounts of waste.

But the good news for the cannabis industry and for the planet is that innovation will continue to shrink inefficiencies and waste in cultivation and processing. So, what is the relationship between the cannabis industry and those public resources, and what can growers do about it? Let’s look at three main pillars of cannabis resources: 

1. Energy 

We know indoor cannabis cultivation requires enormous amounts electricity to power lights, dehumidifiers, fans, water management systems and space heaters. Some analysts have even said that indoor cannabis cultivation is one of the most energy-intensive industries around. However, cultivators interested in reducing their energy footprint can start by getting to know their energy-use profile. Diving deep into a power bill is an excellent start, and adding energy sensors can offer a real-life snapshot of a facility’s power fingerprint. Growers can use an energy data analysis tool such as the Cannabis PowerScore, which helps cultivators assess their energy performance relative to industry benchmarks and gauge how competitive their facility is.

Image: © digieye | Adobe Stock

2. Water

Cannabis plants grow like weeds—literally—and are happy to drink as much water as you give them. In poorly managed grow operations, however, plants can be overwatered, with much of that water going down the drain. Thankfully, modern cultivation techniques have reduced the amount of water a typical grow operation now consumes. Water conservation technologies and practices continue to evolve that will further reduce water usage, and savvy growers will seek ways to shrink their water use footprint even further. As with energy, tracking and understanding water use patterns is essential to achieving deeper savings.

3. Waste 

Remember the old adage, one person’s trash is another one’s treasure? In the case of many industries, and particularly in cannabis cultivation and processing, this saying is especially pertinent. Some operations still dump used soil, nutrient-laden wastewater, stems and other organic matter into the municipal waste stream or worse, into streams or a pit out back; but increasingly, there are buyers for this so-called trash. Extractors can pull cannabinoids from a wide range of plant material, conventional farms may take gently-used growing medium, nutrients can be pulled from wastewater and recovered and almost any waste material can be converted into a useful gas and/or electricity.

How can (and should) government regulation support the industry?

In the United States, few states that have legalized medical or recreational marijuana have chosen to use their regulatory powers to help growers adopt best practices for energy- and water-efficiency and waste management. However, there are a few noteworthy examples of government regulators getting involved and sending signals through mandates or rate structures.

In 2014, for example, Boulder County, Colorado officials passed a law requiring local marijuana businesses to offset 100 percent of their energy use with renewable energy or pay a $2.16 charge per kWh into a clean energy technical assistance fund. Regulators in California are studying how to encourage cultivators to adopt energy-efficient technologies, and Massachusetts will establish energy and environmental standards for cultivation facilities as a condition of licensure. In Oregon, the state is contemplating making changes to its energy code that perversely make indoor cultivation facilities less efficient.  

Can the invisible hand of the market steer us toward sustainability?

In a market for almost any product, as supply begins to meet demand, prices will fall. We are already seeing this in mature cannabis markets, with wholesale marijuana prices under $1,000 per pound in some parts of the country. As prices continue to fall, only producers who can eliminate inefficiencies across their production will be able to remain competitive on cost.

Milton says plant material that could be considered waste can be extracted for cannabinoids and developed into cannabis products such as oils, tinctures, etc. Image: © Okea | Adobe Stock

And in many ways, the free market is providing answers. For example, equipment manufacturers are continually innovating and improving the efficiency of their products. Electric utilities value energy efficiency and offer cash rebates to customers of efficient lights, HVAC and other equipment that reduces power demand. Companies that identify and offer energy savings opportunities for other sectors are bringing their expertise to the cannabis sector.

Some industry organizations are filling the regulatory void by creating a signal for consumers to support environmentally responsible cannabis companies or by supporting industry innovation.

For example, the Cannabis Conservancy provides a sustainability certification to cannabis organizations that adhere to “good agricultural practices,” practice meaningful waste management, are energy and water efficient and a host of other criteria. This and similar programs create a platform that allows consumers to embrace growers who have taken multiple and specific steps to reduce their environmental footprint. And the Resource Innovation Institute works with industry players to identify and advance best practices for energy and water efficient cannabis cultivation and offers tools and resources for its members and the public.

These groups and many others predict that by giving cannabis consumers the ability to make an informed choice about the products they use and how they are produced, more efficient and sustainable companies will be rewarded in the marketplace, creating a virtuous cycle and driving more companies to adopt better practices.

A happy balance between regulation and market forces?

Ideally, companies and their customers are best served when there is a clear signal from government about the policy objectives it wants to serve, and when markets find optimal ways to achieve those goals. Even where government has not adopted outright mandates, many state and local governments give growers tools and resources that can steer them towards more sustainable practices. For example, the City of Denver is working with a range of cannabis stakeholders to develop a guide of best practices for resource-efficient cultivation. After Oregon legalized its recreational cannabis market, state officials convened a working group to address the industry’s energy and environmental footprint and regulatory and market solutions to address it. The result of this engagement is that growers in the state have a better sense of utilities incentives they can apply for as well as additional insights their energy-savings opportunities.

Moving forward, cannabis stakeholders will have to stay agile and willing to explore new approaches in the face of evolving regulations and market forces. But regarding the energy and environmental footprint of commercial cannabis cultivation, it’s a safe bet that both government regulators and the market will continue to reward those growers that take proactive steps to reduce their energy and water use and waste stream.

Sam Milton is principal of Climate Resources Group, a Boston-based climate and energy consulting firm that works with cannabis growers and their allies to lower the industry’s environmental footprint.

Top image: © Eric Limon | Adobe Stock