Luxembourg, Loaded

The Grand Duchy is on its way to legalize cannabis, but pitfalls remain.

By Stefanie Rossel

In late 2018, Luxembourg made headlines when it announced that it would become the first country in Europe to legalize the cultivation, sale and recreational consumption of cannabis. Part of an election promise, the plan has become enshrined in the coalition agreement between the governing liberals, social democrats and the green party.

Once enacted, the law would be even more permissive than legislation in the Netherlands, which presently has the most liberal cannabis policy in the EU. While recreational use, possession and trade of nonmedicinal drugs are technically illegal under Dutch law, the country tolerates recreational drug use as well as ownership and dealing under certain circumstances. Dutch authorities reason that it’s more effective to spend their resources on minimizing the harm caused by recreational drug use than on chasing the unattainable goal of a drug-free society. Inconsistently, however, the Dutch government does enforce its ban on cannabis cultivation.

Luxembourg wants to go further. Health Minister Etienne Schneider, who is a passionate critic of the country’s repressive drug policy as it has been applied during the past 50 years, wants to drain the black market by permitting cannabis consumption by adults, establishing state-controlled hemp cultivation and licensed stores for the sale of quality-assessed cannabis products at competitive prices.

Although Schneider said upon his reelection that he aimed to fully legalize cannabis by 2021 at the latest, one year later, there is still no sign of concrete cannabis regulation in the Grand Duchy. In early 2019, the country’s ministers of health and justice commissioned a working group to analyze the issue, taking into consideration the experience of other countries as well as scientific literature, a spokesperson of Luxembourg’s government told Tobacco Reporter. “There is no set timeframe,” she said. “We want to take the time needed and not rush this important project.”

The slow progress is likely also due to unexpected resistance to the plan. Worried citizens in neighboring Germany have already asked their government to close the border following the legalization of cannabis in Luxembourg. A provision in the proposed law prohibiting the sale of cannabis to non-Luxembourgers has done little to ease the concerns; around 200,000 foreigners commute daily to work in the Grand Duchy, which has a population of 614,000.

The rules under discussion reportedly will limit cannabis use to the private sphere; public consumption will remain off-limits. Private hemp cultivation will also be forbidden. According to the government, farmers interested in the crop can apply for licenses. The tax earnings from cultivation and a marketing chain will be spent on the prevention of drug abuse. The planned regulation is also likely to limit concentrations of THC, a provision that some say may drive consumers back to illicit sources. Critics fear that these and other provisions will dilute the rules to the extent that “liberalization” may end up being very similar to the current prohibition. 

Careful regulation needed

Luxembourg legalized cannabis for medical use in 2018, albeit within strict limits. Only patients who are terminally ill can get cannabis prescriptions. Prescribing doctors are required to undergo training by the Ministry of Health. According Tageblatt, a local German language newspaper, demand has been higher than expected: 270 patients were given cannabis between February and June 2019, which in July prompted the government to advise authorized doctors not to treat new patients with medicinal cannabis until October.

The market for cannabidiol (CBD), the nonpsychotropic ingredient of the cannabis plant, has grown in recent years. Meanwhile, CBD oils, creams or tea are sold in around 35 shops across the country. After the government announced its legalization plan, the shops were set up by entrepreneurs hoping to one day turn them into “coffee shops” similar to those in the Netherlands. Pharmacies are not allowed to sell CBD products. While the sale of cannabis flowers is permitted, use of the substance in cosmetics is not. As a nutrition supplement, concentrated CBD in January 2019 was defined as a “novel food” that is required to pass an approval procedure.

As long as their THC content is below 0.3 percent, CBD products are legal. Since Dec. 1, they have been subject to tobacco taxation, meaning that an excise duty of 33.15 percent as well as 17 percent VAT is added to the price of each gram. The measure is anticipated to dampen demand and shutter many CBD shops.

The cultivation of industrial hemp has been legal in Luxembourg since 1994. It plays an important role in the food industry, the construction sector and the garment business. After the legalization, cannabis will present famers with a potential new source of income and an opportunity for agricultural diversification. Taking Canada as an example, Luxembourg’s government hopes for a similar “green rush.”

In October 2018, Canada fully legalized marijuana. As of July 2019, cannabis had contributed $8.26 billion to the Canadian economy, according to Bloomberg. Jobs in the sector nearly quadrupled to 9,200 jobs during that period.

Looking at experience with cannabis legalization in Canada and the Netherlands, Luxembourg’s regulators should, however, also consider other factors. While after more than a year into legalization, Canada’s producers nearly produce enough legal cannabis to meet annual demand, it appears that their products are not what consumers are looking for. With the THC content of legal products limited, some consumers are still buying from illicit sources. As a result, Canada’s black market still thrives—an unintended consequence that Luxembourg hopefully will be able to avoid.