UK Government Invests £100m to Restart CO2 Plant
The UK government is preparing to invest £100 million to reopen a previously closed carbon dioxide (CO2) production plant as part of a contingency plan addressing potential supply disruptions linked to the ongoing war in Iran.
The Department for Business is anticipated to announce on Thursday that the Teesside site, operated by Ensus, will resume operations after being mothballed last year.
Importance of CO2 in Food and Drink Industry
CO2 plays a crucial role in the food and drink sector. It is used to stun livestock during slaughter, preserve food freshness through packaging, and is a key ingredient in carbonated beverages.
The plant in question produces bioethanol, a process that generates CO2 as a byproduct. It was shut down following a government trade agreement with the United States that eliminated tariffs on American ethanol imports into the UK.
Factors Influencing the Decision
The decision to reopen the plant, initially reported by the Financial Times, is believed to be influenced partly by concerns over rising energy costs impacting European fertilizer companies, which also produce CO2 as a byproduct.
Both the Department for Business and Trade and Ensus have declined to comment on the matter.
Geopolitical Context and Energy Prices
Since the US and Israel initiated military actions against Iran on 28 February, oil and gas prices have surged significantly.
In response, Tehran has effectively closed the Strait of Hormuz, a critical shipping lane responsible for transporting one-fifth of the world’s oil and gas supplies.
Historical CO2 Supply Challenges in the UK
In 2021, the UK’s food and drink industry experienced a CO2 supply crisis triggered by a sharp increase in wholesale gas prices and manufacturing difficulties faced by fertilizer producers. These supply issues and elevated costs persisted into the following year.
In May of the previous year, the UK government finalized a trade deal with the US that removed a 19% tariff on ethanol imports up to a quota of 1.4 billion litres, roughly matching the size of the UK market at that time.
Consequently, Vivergo Fuels, formerly owned by Associated British Foods and a bioethanol producer, ceased operations, and Ensus’s plant was mothballed.
