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October 11, 2021updated 12 Oct 2021 10:11am

UK government announces extended CO2 supply deal

The newly-agreed deal with the country's major CO2 supplier runs until January 2022.

The UK government has announced an agreement to ensure supplies of carbon dioxide – vital to the country’s food businesses – until the New Year.

CO2 is a by-product of fertiliser manufacturing and widely used in areas such as meat processing – in the slaughtering process – and the packaging of chilled foods.

Last Month, CF Industries, which accounts for 60% of the country’s CO2 production, shut down two fertiliser plants in northern England, blaming high gas prices. The move created fears of pressure on food supplies.

The Government subsidised a three-week deal with the US company which saw it re-open one of the plants but now says it has brokered an agreement for a longer period between suppliers and wholesalers.

In a statement issued today (11 October), the Government said CF has agreed to continue supplies of the gas until early next year, allowing the Government and firms time to find other sources of CO2.

It said: “CO2 suppliers have agreed to pay CF Fertilisers a price for the CO2 it produces that will enable it to continue operating while global gas prices remain high, drawing on support from industry and delivering value for money for the taxpayer.”

Business Secretary Kwasi Kwarteng said: “Today’s agreement means that critical industries can have confidence in their supplies of CO2 over the coming months without further taxpayer support.

“The Government acted quickly to provide CF Fertilisers with the support it needed to kick-start production, and give us enough breathing space to agree a longer-term, more sustainable solution.”

The deal runs until January 2022.

The Government also announced that another commercial CO2 producer, Ensus, reopened its plant last week following temporary closure for planned maintenance, further securing supplies. The plant at Wilton in south-west England can produce up to 40% of the UK’s CO2 requirements.

Food companies and the bodies representing them will be keen to examine the small print of the deal announced by the government today as it has previously been suggested they would be forced to pay five times more for carbon dioxide as part of a Government deal with CF Industries.

UK broadcaster the BBC pointed out that Environment Secretary George Eustice said carbon dioxide prices would rise from GBP200 (US$272.85) per tonne to GBP1,000.

Just Food asked the British Meat Processors Association (BMPA) and the Food and Drink Federation (FDF) for their response to today’s announcement.

FDF chief executive Ian Wright said: “UK food and drink manufacturers will be relieved by the announcement of a deal which guarantees that CF Industries will continue to produce CO2 until at least January 2021. This should ensure a consistent supply through the vital food and drink production period in the run-up to Christmas.

“Although welcome news, the increased cost of buying CO2 is yet another burden on the food and drink industry, which is already facing enormous stresses. This will of course add more pressure on prices for shoppers and diners.

“We continue to work with the government to ensure supply continues. Once we are certain that the immediate supply issues are resolved, we will then turn our attention to the need to build resilience into the production of CO2 to protect our food and drink supply chain.”

A BMPA spokesperson said: “The agreement between CO2 manufacturers and wholesalers provides some reassurance that supplies will be maintained.

“However, industry has been given no detail on what the price will be or how it will be calculated going forward. We understand that Business Secretary Kwasi Kwarteng took the decision to temporarily exempt parts of the CO2 industry from competition law to facilitate this agreement; what we need now is some detail and transparency around how the new pricing structure will work.”

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