Impacts and consequences of drug markets

• Author: European Monitoring Centre for Drugs and Drug Addiction (EU body or agency), Europol (EU body or agency)
• Pages: 28-57

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e size of the illicit drug market

e illicit drug trade is amajor global industry, encompassing

production, tracking and retailing. e hidden nature of

the illicit drug business makes it dicult to estimate the

amount of money it generates, and published estimates are

variable, covering dierent parts of the market and dierent

geographical areas and involving many assumptions and

associated uncertainties. One recent report on global

transnational crime (Channing May, 2017) estimated the

value of the global market for the main illicit drugs (cannabis,

cocaine, opiates and amphetamine-type stimulants) to be

between USD426billion and USD652billion in 2014. e

large size of the market makes it attractive to criminals, and

the drug market contributed over aquarter of the total value

of the 11 major transnational crimes the report studied.

However, it is important to note that, as with legal markets,

the value of sales is not the same as prot; costs and losses

occur at all stages along the supply chain.

In the EU, the total value of the retail market for illicit drugs

in 2017 was estimated at EUR 30 billion — this gure

must be viewed as a minimum estimate for a number

of methodological reasons (see page 30). e cannabis

market is the largest, accounting for about 39% of the

total, followed by cocaine (including crack cocaine) (31%)

and heroin (25%) (Figure1.1). ese new estimates build

on the initial estimates produced for the last EU Drug

Markets Report (EMCDDA and Europol, 2016), but make

use of new sources of data that have been developed in

the interim. ey are therefore not directly comparable

with the previous estimates and cannot be used to assess

trends. ere are also still many gaps in the available data

underpinning these calculations and they therefore remain

minimum estimates that require ongoing work to improve

them (see box ‘e challenge of estimating the size of

the illicit drug market’). Nevertheless, they illustrate the

importance of the markets for dierent drugs and the large

money ows associated with them.

To put the size of the illicit drug market into the context of

the wider economy in the EU, it has been estimated that illicit

drug production and tracking in the 10 Member States

CHAPTER 1

Impacts and consequences

of drug markets

Assessing the value of seized drugs

e value of the drugs seized may be an important

component for assessing the impact of drug supply

reduction. Despite being afairly crude metric, it is one

that most people can relate to. Because commonly

available data relate to retail prices, the value is

sometimes expressed in terms of the potential value

at retail level. However, amore appropriate measure

is to calculate the nancial loss that the OCG would

record on its balance sheet (Reuter and Greeneld,

2001).

is is best illustrated by an example. Consider

ashipment of 100 kg of cocaine seized on entry to

Europe. e estimated street value could be reported

as EUR6000000 (100000×retail price per gram

in Europe, say EUR60), making no adjustment for

purity. However, the investment lost by the OCG,

in this example, would be the much lower value of

EUR250000 (100×cost per kilogram of cocaine

at the origin, say EUR2500). In addition, the OCG

would also have incurred other costs, such as those

relating to transport, which they would not be able to

recoup. Estimating the value in terms of the loss may

be amore transparent and realistic way to measure

the impact of drug supply reduction interventions.

However, this will require the collection of more data

about arange of variables, such as price and purity,

along the supply chain.

EU DRUG MARKETS REPORT

29

for which data are available(1) ranged between 0.02%

(Luxembourg) and 0.6% (Italy and Sweden) of the national

gross domestic product (GDP) in the period 2004-15, and

was 0.4% or above in half of the countries (Eurostat, 2018a).

is is broadly comparable with available global gures,

showing retail drug sales in the US in 2010 being equivalent

to 0.7% of GDP and across 21 EU countries(2) in 2015 being

equivalent to 0.32% of the GDP (UNODC, 2017). Although

all EU countries produce data on the contribution of illicit

activities to GDP as part of their national accounts, often they

are not disaggregated to allow identication of drug-related

gures. Furthermore, where available, published studies

vary widely in the period covered — from 2004 (Denmark) to

2013 (Luxembourg) (Eurostat, 2018a).

Beyond estimates of the retail market size, there

remains aneed to develop our understanding of the

(1) Czechia, Denmark, France, Germany, Italy, Luxembourg, Netherlands,

Spain, Sweden, United Kingdom.

(2) Austria, Belgium, Bulgaria, Czechia, Cyprus, Denmark, Estonia, Finland,

Greece, Hungary, Ireland, Latvia, Lithuania, Luxembourg, Portugal,

Romania, Slovenia, Slovakia, Spain, Sweden, United Kingdom.

economics of other aspects of the drug market, such as

production and wholesale supply activities and the costs

of responses to drug markets. Some progress has been

made in improving the data in these areas, for example

commencing the collection of wholesale price and purity

data, and developing estimates of the cost of the clean-up

of waste from synthetic drug laboratories. Both of these

topics are discussed in this report. Other institutions and

organisations are also working in this area. For example,

Tops et al. (2018) sought to estimate the potential value of

synthetic drugs produced in the Netherlands for the global

market, suggesting that it was at least EUR18.9billion at

retail prices and that Dutch producers and trackers may

receive about EUR3billion to EUR5billion as revenue.

Estimates are also often made of the value of seized

shipments of drugs (see box ‘Assessing the value of seized

drugs’), but all these estimates are based on limited data

and broad assumptions, so they need to be viewed with

caution.

Figure1.1

Estimated retail value of the illicit market for the main drugs in the EU

39 %

Cannabis

31 %

Cocaine

25 %

Heroin

3 %

2 %

Amphetamines

€ 1 2 . 8 b n

€ 1 0 . 5 b n

€ 9 . 1 b n

€ 7 . 6 b n

€ 6 . 4 b n

€ 1 0 . 5 b n

€11.6 bn

€9.1 bn

€7.4 bn

€0.5 bn

€0.5 bn

€1.0 bn

€30 billion

EU retail market size

minimum estimate

How to read the chart

Central estimate

Estimated range

€ 0 . 3 b n

€ 0 . 8 b n

EU retail market size

minimum estimate

(% of total)

Ecstasy/MDMA

Source: EMCDDA (2019a).

CHAPTER 1

I

Impacts and consequences of drug markets