No.10 Signals CO2 Plant Funding Could Be Extended To Avoid Winter Crisis
The government has left the door open to funding the operation of a key CO2-producing plant beyond the three weeks agreed amid warnings that the industry faces long-term disruption.
A Downing Steet spokesperson on Wednesday said the deal reached with CF Industries to keep its fertiliser plant in Billingham open was an "exceptional short-term arrangement" designed to create time to find a "market solution".
But they did not rule out extending the funding beyond the time limit currently in place.
Business Secretary Kwasi Kwarteng last night said the government had agreed to subsidise the running costs of a plant owned by CF Industries which closed last week due to soaring gas prices.
The government will cover the factory's costs for three weeks to "ensure the many critical industries that rely on a stable supply of CO2 have the resources they require to avoid disruption," he said.
Ministers were under huge pressure to get it back up-and-running amid warnings that CO2 shortages triggered by its closure would result in shortages of some food and drink within days.
CO2, which is a by-product of fertilisier manufacturing, is vital for meat processors, who use it in slaughterhouses and to chill and package meat before it is sold to supermarkets and restaurants. The gas is also used to produce fizzy drinks and a range of beers.
The Downing Street spokesperson refused to rule out subsidising the plant for longer than three weeks, however, and was also unable to say how much the deal was expected to cost the government.
"In terms of the the cost, I can't put a finger on it," they said.
Industries which rely on CO2 to manufacturer goods welcomed news of the deal agreed last night, with the British Meat Processors Association (BMPA) today saying it had probably prevented 25% of poultry production grinding to a halt.
However, the BMPA said there would have to be "complex discussions" about how to get CO2 levels back to normal and that the government would have to "restructure" the industry to avoid future crises.
The British Soft Drinks Association's Gavin Partington said that while the government deal with CF Industries was welcome, he still expected shortages of fizzy drink brands over the next few weeks as it could take up to two weeks for the re-opening of the Billimgham plant to have a positive impact.
The CO2 shortages are part of a wider crisis facing the energy market, with rocketing prices having already resulted in the collapse of several companies including Avro Energy and Green, which both shut down today.
Jonathan Brearley, chief executive of Ofgem, the UK's energy regulator, today said he expected more suppliers to go bust and cast doubt on Boris Johnson's claim that issues facing the energy market would be "short-term".
He told MPs on the Business, Energy and Industrial Strategy Select Committee that "large numbers of customers" would be affected by rising prices and that the speed of rises was unprecedented.
"Have a look at the change in the gas price – it really is something that we don't think we've seen before at this pace," Brearley said.
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