Could rescheduling marijuana bring about changes that help reduce the energy that commercial cannabis cultivators use and improve the environmental impact of the industry overall?
It is well established that indoor cannabis cultivation facilities have a significant energy and environmental footprint, largely stemming from the enormous electricity draw of horticultural lighting, powerful HVAC-D systems and the various pumps, fans and other equipment required to maintain an optimal growing atmosphere.
While we can’t fully predict what a post-rescheduling U.S. marijuana sector would look like, we can look to the controlled-environment agriculture (CEA) sector for some examples of how cannabis cultivators might be able to shift production to less energy-intense models.
Benefits for clean energy and energy efficiency
Rescheduling could open a range of federal programs that have remained out of reach for marijuana businesses under federal prohibition.
In 2022, the Biden administration unlocked billions of dollars through the Inflation Reduction Act to support clean energy and agricultural programs.
For example, through grant programs and loan guarantees, the U.S. Department of Agriculture has helped thousands of domestic CEA businesses afford the installation of clean energy and energy-efficiency technologies, such as LED grow lights, advanced HVAC-D, chillers, heat pumps, clean power generation and more.
Because of the relatively heavy administrative burden associated with applying for USDA money, the program is most appropriate for larger facilities.
Thankfully, there is a healthy ecosystem of federal grant assistance organizations that can work with CEA businesses of any size on USDA grant and loan applications.
IRS tax credits and deductions
Businesses that make investments in above-code energy efficiency measures are allowed to claim a tax deduction through the IRS’ energy-efficient commercial building property and energy-efficient commercial building retrofit property programs.
For cannabis businesses interested in on-site renewable energy, such as solar photovoltaic panels, the IRS also offers an investment tax credit equal to 30% of the installed project cost.
In most cases, companies will need to show proof to the IRS that the claimed clean-energy and energy-efficiency investments reduce their facility’s energy use at least 25% above code.
Not only will businesses have to present a full accounting of the project costs, but they will need to present an energy-savings calculation performed by an outside energy services or engineering firm.
I strongly recommend asking a tax adviser for guidance.
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