CF Fertilisers: Deal to support US-owned CO2 producer could cost taxpayer 'tens of millions'
Speaking to Kay Burley, Environment Secretary George Eustice says that without the "temporary" agreement with CF Fertilisers there would have been food supply problems and the government "needed to act".
Wednesday 22 September 2021 13:59, UK
The government could end up giving tens of millions of pounds of taxpayers' money to an American company to help it restart carbon dioxide production, a minister has told Sky News.
Speaking to Kay Burley, Environment Secretary George Eustice said that without the "temporary" agreement with CF Fertilisers there would have been food supply problems and the government "needed to act".
CF produces around 60% of the UK's CO2 supply, which is why the closure of two sites last week, blamed on a surge in gas prices, had prompted fears that shoppers could start noticing shortages in poultry, pork and bakery products within days.
CO2 is injected into the packaging of perishable foods such as meat and salads to inhibit the growth of bacteria, typically prolonging the shelf life of products such as beef steak by around five days.
The gas is also used to stun animals prior to slaughter, and is deployed as a coolant for medicines and vaccines in the NHS, and likewise in nuclear programmes.
"It's going to be into many millions, possibly the tens of millions but it's to underpin some of those fixed costs," the minister said, when asked about the cost of the deal.
The process of restarting one of the plants - in Billingham - began last night, but the firm says it could take several days to get back to full production. It follows an agreement that will see the government provide "limited financial support" towards the firm's running costs for three weeks.
"They're big costly plants," Mr Eustice continued, adding that it will take 48 hours for operations at the plants to get up and running again.
"We need the market to adjust, the food industry knows there's going to be a sharp rise in the cost of carbon dioxide, probably going from something like £200 a tonne eventually up to closer to £1,000 a tonne, so a big, sharp rise."
And he defended the deal, saying: "The truth is if we did not act then, by this weekend, or certainly by the early part of next week, some of the poultry processing plants would need to close and then we would have animal welfare issues - because you would have lots of chickens on farms that couldn't be slaughtered on time and would have to be euthanised on farms, we would have a similar situation with pigs.
"There would have been a real animal welfare challenge here and a big disruption to the food supply chain, so we felt we needed to act."
The environment secretary said a "perfect storm" had been created by two plants in the UK and Norway shutting down for maintenance at the same time as CF stopped operations of its two factories because of high energy costs.
In a news release, CF Industries said its ammonia plant at Billingham would be restarting, but made no mention of its second facility in Cheshire.
The company also made no mention of fertiliser production restarting.
Labour's shadow business secretary Ed Miliband welcomed the deal, but urged the government to "urgently engage with unions and the wider manufacturing industry, and explain the contingency plans in place in case issues are not resolved in three weeks".
He continued: "Crucially, the government cannot keep blaming surging gas prices and supply chain chaos on external forces.
"t is a decade of Conservative missteps that has left the UK so exposed and vulnerable, without the diverse, resilient energy system we need to protect us from global volatility.
"It is businesses, consumers and families that are now paying the price."
Ian Wright, chief executive of the Food and Drink Federation, said the intervention was a "temporary solution but it's a welcome one".
He added it means "there won't be many noticeable shortages on the shelves, although there are already some because of staff shortages".
This sentiment was echoed by the Confederation of British Industry, which said the deal 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," chief policy director Matthew Fell said.
"Given significant price rises affecting both businesses and consumers, it's essential vulnerable customers and key energy intensive companies, which underpin critical UK supply chains, are well supported throughout the winter.
"Meanwhile, action must be taken to ensure the UK's transition to low-carbon power. Longer-term, we need to review the regulatory framework that has failed to deliver investment and resilience needed."
But Iceland managing director Richard Walker said: "A three week deal won't save Christmas, and certainly won't resolve the issue in the long term - we need a permanent solution to keep the wheels turning for fresh food supplies."
The CF deal came as the prime minister told Sky News the energy crisis was a "short-term problem" and said he did not think there would be disruption to food supplies at Christmas.
The gas price spike is also having a big impact on domestic energy suppliers - with two smaller players going out of business last week.