Price hike fears as agreement reached to ensure CO2 supplies

By James McAllister

- Last updated on GMT

Price hike fears as agreement reached to ensure CO2 supplies

Related tags: Carbon dioxide, Supply chain

Industry experts have warned a Government-brokered deal to ensure CO2 supplies to UK businesses until the new year risks pushing up food and drink prices in the run-up to Christmas.

Yesterday (11 October), it was confirmed that US firm CF Industries, a key CO2 producer in the UK, had agreed to continue supplies of the gas.

A 70% rise in wholesale gas prices in August prompted CF Industries to stop production at its two fertiliser plants in Teesside and Merseyside, which led to fears of a food and rink industry crisis​.

However, the Government subsequently stepped in and agreed a short-term arrangement with CF Fertilisers to restart operations at the Teesside plant​ while a longer-term solution was found.

Under the new deal, brokered by the Department for Business, Energy and Industrial Strategy (BEIS), CO2 suppliers have agreed to pay CF Fertilisers a price for the CO2 it produces.

The gas is used to stun animals for slaughter, package meat and also in refrigeration systems. It is also used in fizzy drinks, beer, cheese, fruit and vegetables and crumpets, among other items.

Environment Secretary George Eustice said: "CO2 is vital for our food and drink sectors. The Government has taken decisive action in these exceptional circumstances to allow a deal to be reached which will continue the supply of CO2 to businesses – including thousands of food and drink businesses – up and down the country."

The Food and Drink Federation, while welcoming the intervention, warned the deal allowed CF to charge more for CO2, which will increase costs for restaurant operators and customers.

Ian Wright, chief executive of the Food and Drink Federation, said: “UK food and drink will be relieved by the announcement of a deal which guarantees that CF Industries will continue to produce CO2 until at least January 2022.

"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.”

Industry leaders have suggested a possible fivefold spike in the cost of CO2, which is essential in the production of pork, turkey and chicken.

According to The Telegraph​,​ there is speculation that prices of CO2 could jump from £200 to as much as £1,000 a tonne.

Related topics: Business & Legislation

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