CO2 shortage in the UK and Europe

Date : 22 September 2021

CO2 production resumed

Production of CO2 at CF Industries’ plant in Teesside will be resumed in the next few days, as the government is set to cover full operating costs to run the plant for three weeks. The plant is due to become operational again in three days’ time. CF Industries’ second plant, located in Cheshire, will still remain closed for now.

US-owned CF Industries has recently stopped production of CO2 in two sites that produce 60% of the country’s carbon dioxide supplies due to rising natural gas prices.

Business Secretary Kwasi Kwarteng said the "exceptional short-term arrangement" would ensure industries that rely on a stable supply of CO2 "have the resources they require to avoid disruption".

Meanwhile, Tony Will, chief executive at CF Industries, commented: “We look forward to working with Secretary Kwarteng and the UK government on developing a longer-term solution, including the development of alternative suppliers of CO2 for the UK market.”

The move has been welcomed by the British Retail Consortium (BRC), although Andrew Opie, director of food and sustainability at the BRC said the timetable to restart CF Industries' factory and start producing carbon dioxide "will still be tight".

Potential impact on food supply

A recent rise in natural gas prices in the UK and Europe has caused a shortage of carbon dioxide (CO2), which is used to stun animals before slaughter, prolong food’s shelf life and to put the fizz in beer, cider and soft drinks.

According to the UK’s largest poultry supplier, the current shortage of CO2, coupled with an acute shortage of workers, may impact supplies for some time to come.

The jump in natural gas prices, which comes at a time where winter is at our doorstep and demand for heating increases, has also led to the shutdown of two large fertiliser plants in Teesside and Cheshire that produce CO2 as a by-product.

Prior to yesterday’s announcement, Nick Allen, the head of the meat industry’s lobby group has warned that some of Britain’s meat processing factories may run out of CO2, meaning they will not be able to operate, while the Food and Drink Federation chief executive Ian Wright said CO2 was essential to many production processes and warned there could be "serious consequences" for supplies within a matter of days.

In addition, retailers were also highlighting potential impacts. The British Retail Consortium (BRC), which represents retailers including the major supermarket groups, said the CO2 crisis added to existing pressures on production and distribution. Andrew Opie, the BRC's director of food and sustainability, said: “Retailers are working with their suppliers to resolve this issue, but government must investigate this issue as soon as possible and work with industry to ensure a solution is found quickly and problems don’t escalate further.”

This is not the first time that natural gas prices have soared. The graph below shows the evolution of natural gas price indices across the last 20 years. Similar, if not higher prices have been observed in 2014, 2008 and 2005.

 

Source: IMF

Issue exacerbated by the already existing shortage of lorry drivers

The shortage of CO2 puts additional pressures onto the food industry, particularly in light of the  current shortage of lorry drivers which is already causing food supply issues.

The supply of CO2 has been an issue in the recent past, partly due to poorly planned maintenance routines of plants that produce CO2 for the food industry. There are also concerns that a shortage of agrichemicals may occur in the future, which might compound food supply issues.