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Wednesday, October 27, 2021

UK agrees ‘short-term’ bailout for CO2 firm amid food supply fears

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LONDON — The British government is stepping in with a “short-term” bailout for a beleaguered carbon dioxide manufacturer in a bid to stave off fresh disruption to the food supply chain.

Energy Secretary Kwasi Kwarteng announced late Tuesday that the government had struck an agreement with U.S. firm CF Fertilisers to ensure the continued supply of CO2 to U.K. businesses, amid concern the shortages could spread beyond Britain.

CF’s plants, which supply food-grade carbon dioxide as a byproduct of their manufacturing process, halted production amid a surge in gas prices, cutting off supply and prompting warnings from soft drink firms and meat processers who rely on CO2.

The three-week arrangement announced by Kwarteng will cover operating costs so the firm can immediately restart its Billingham plant. “This agreement will ensure the many critical industries that rely on a stable supply of CO2 have the resources they require to avoid disruption,” Kwarteng said.

CF is Britain’s main CO2 producer and meets 60 percent of its demand, and the deal follows talks between Kwarteng and CF Fertilisers CEO Tony Will over the past couple of days. It will see the company restart production at one of two plants earmarked for closure. The BBC reported the cost to taxpayers is in the “low tens of millions” and is less than £50m.

Staff were allowed into the Billingham site on Teesside around 10 p.m. last night after assembling throughout the evening.

The move will also protect the U.K.’s six advanced gas-cooled nuclear reactors, which rely on CO2. Ministers were briefed Tuesday that the reactors were at risk and might have to close.

“These will be three tense weeks while we have to try and work something more long-term out,” a senior civil servant told POLITICO’s London Playbook.

The decision to bailout CF has already sparked concern among some Conservative MPs about excessive state intervention.

Ex-Conservative leader Iain Duncan Smith told the Sun newspaper: “This should be a very time-limited operation and must be suspended as soon as they can ship CO2 into the U.K. from elsewhere. The bigger, longer term problem is supply of energy — successive governments have taken their eye off the ball of energy security, which we are no longer producing here in this country. We won’t survive if we go on like this.”

Defending the plan on Tuesday morning, Environment Secretary George Eustice said the U.K. government was only aiming for a “short-term intervention,” and predicted that “eventually the market will adjust” as the price of CO2 rises and suppliers hit by technical problems come back on stream.

He told ITV’s Good Morning Britain: “We’re not in the business of manufacturing carbon dioxide in the long-term, but we do have a duty as a government to make sure the food supply chain operates.”

Business lobby group the Confederation of British Industry gave a cautious welcome to the bailout with Policy Director Matthew Fell saying it would “provide some short-run reassurance for the food sector and others heavily reliant on CO2.”

“Yet retail energy suppliers are still urgently anticipating measures from the government — delivered alongside industry — to provide stability,” he warned.

“Given significant price rises affecting both businesses and consumers, it’s essential vulnerable customers and key energy intensive companies, which underpin critical U.K. supply chains, are well supported throughout the winter.”

Britain’s food suppliers are already grappling with labor shortages which are hitting factory floors and farms as well as the truck drivers that move products.

Yet the CO2 crisis is unlikely to stay confined to the U.K., a major continental supplier of industrial gases has warned.

Nippon Gases said “other countries in Europe will also suffer shortages” of CO2 and estimated that its supplies had tumbled 50 percent across the region, the Financial Times reported.

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