Germany is mulling over the consequences of soon becoming the world’s largest potential market for legally sold cannabis, as the country’s left-liberal government presses ahead with plans to allow the controlled distribution of the drug among adults.

Olaf Scholz’s coalition government has in recent weeks reiterated its 2021 coalition-deal vow to legalise for recreational use what its Green and liberal party minister have taken to referring to as Bubatz, a slang word for weed popular among German rappers.

A consultation process consisting of five public hearings with health experts, economists and cannabis growers concluded this week, firing the starting gun for a race to clear legal and regulatory hurdles within one to two years. A draft bill is expected within the second half of 2022.

Europe’s largest economy joining Canada and California in legalising cannabis for recreational use could create momentum to change the UN convention that restricts the cultivation of the plant and also puts pressure on neighbouring European states to follow Germany’s lead.

“There will be a domino effect, for sure,” said Justus Haucap, the director of the Düsseldorf Institute for Competition Economics. “European countries that have a much bigger problem with illegal cannabis use, like France, are watching very closely what Germany is doing at the moment.”

The country would also stand to reap significant economic benefits: with an estimated annual domestic demand of 400 tonnes of cannabis, Haucap’s institute predicts Germany stands to gain about €4.7bn (£4bn) a year through additional tax intakes as well as cost savings from no longer prosecuting those who enjoy a spliff or two.

The government’s official motivation for legalisation is to break up the illegal cannabis trade, thus gain control of the quality of cannabis on sale, prevent the circulation of contaminated substances and protect minors.

“We are talking about a regulation of the market,” said Burkhardt Bienert, the German commissioner on narcotic drugs on Thursday. “If we do it well, we can prevent adolescents from entering into intensive use. We don’t want to repeat the mistakes we made with alcohol.”

The recent consultation event, with public officials from countries that have already legalised cannabis, also crystallised some of the tough choices the German government faces to achieve its stated aim.

In Uruguay, where recreational use of cannabis has been legal since 2013, only 25 pharmacies are licensed to sell the drug and 70% of consumers still buy off the black market.

In California, which legalised recreational cannabis use in 2016, the legal weed industry has struggled to compete with the illicit market, while Canada has made some progress since legalisation in 2018, but through a regionally varied patchwork of free-market and state-controlled supply systems that makes it hard to draw broad lessons.

In the Netherlands, which is known for its relaxed attitude to smoking weed but still technically criminalises recreational use, possession and trade, the government is experimenting with a closed supply chain scheme and a track-and-trace system in order to cut the black market out of its coffee shop culture.

The hemp industry is lobbying the German government to tax cannabis products at no more than €10 a gramme of bud, with a lower rate for plants with lower tetrahydrocannabinol (THC) content. A higher rate of taxation would give an advantage to illicit dealers, they argue, as would a wholesale ban on advertising state-offered weed.

Niklas Kouparanis, CEO of Bloomwell, a startup founded after Germany legalised the medical use of cannabis in 2017, also called on the government to legalise the sale of cannabis through online vendors. Authorising only pharmacies or licensed shops to sell cannabis would limit distribution to cities and push dealers to the countryside, he argued.

“Legalisation will only be a success if we manage to drain the black market, and we will only be able to do that if we can provide a comprehensive nationwide supply of legal cannabis,” said Kouparanis. “If you only have a handful of supply stations in Bavaria, for example, the black market will survive and Germany will become a model to emulate for precisely no one.”

However, youth welfare and child protection groups are highly critical of selling cannabis via e-commerce channels. At Thursday’s hearing, they argued if the government wants to live up to its stated aim of protecting minors, it needs to ensure cannabis is only sold over the counter by trained and licensed staff.

If the German state were to put itself in charge of supplying adult users with cannabis, it would in the short term be reliant on imports. Five years into the legalisation of medical use, Germany still relies on imports from Canada, Portugal, Spain or the Netherlands for 85% of its annual use.

Entering the business of trading and selling cannabis would also put Germany in violation of the UN 1961 single convention on narcotic drugs. The country could follow Canada and Uruguay’s lead and try to ignore the convention, or find a way around it. It would be more likely that legalising cannabis in Germany could trigger a movement to change the agreement entirely, said Haucap.

He said: “In theory, Germany could exit the UN single convention and rejoin only specific parts of it. But I am fairly optimistic that with changes happening in Canada, the US and now Germany, we could also be looking at a reform of the convention in regards to the cannabis trade.”

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