Bailout of US CO2 supplier will cost UK taxpayers ‘millions’

The UK government’s bailout of a private US firm that supplies carbon dioxide to the food industry will run into “many millions of pounds”, the environment secretary has said.

George Eustice said the financial support was necessary for three weeks to enable CF Industries, a fertiliser company that supplies CO₂ as a byproduct, to restart production at one of its sites.

Food suppliers need carbon dioxide for meat production and packaging of fresh foods, but high gas prices had made it uneconomic for CF Industries to operate its sites in Teesside and Cheshire. It supplies about 60% of the CO₂ that the UK needs for food production.

Eustice said taxpayer support would be needed for only about three weeks – until the market adjusted with more supply from elsewhere and customers of CF Industries adapted to a higher carbon dioxide price.

On the cost, he told BBC Radio 4’s Today programme: “It’s into the millions. I’m not going into the precise figure because government lawyers are working on the terms of the deal … it’s a commercial arrangement.”

Challenged on why the UK taxpayer was bailing out a private US firm, Eustice said: “The reason why it is justified for the government is … if we didn’t, there would be a risk to the food supply chain. It’s not a risk the government is willing to take.”

According to CNN Business, CF Industries Holdings is owned mostly by big American institutional investors such as Vanguard Group, BlackRock and Fidelity.

The environment secretary said he could guarantee the problem would be sorted in three weeks as the price of CO₂ would simply have to increase in that time. He said the extra cost of carbon dioxide would not greatly increase food prices as the gas was only a tiny proportion of overall costs.

Pressed on the squeeze on household bills from the universal credit cut, higher energy bills, the national insurance rise and inflation, Eustice echoed the prime minister’s insistence that people would be able to cope because of higher wages.

However, Labour has warned that working families face a squeeze on living standards “on a scale not seen for a generation” because the Conservatives had “left issues to fester”.

The Department for Business, Energy and Industrial Strategy said the “exceptional short-term arrangement” with the US-owned firm would allow the company to restart operations immediately and produce CO₂ at its Billingham plant in Teesside. The firm has another site in Cheshire, which remains closed.

Retailers and suppliers had warned on Monday that supermarkets would begin to run short of poultry, pork and some other fresh foods by the end of next week if the government did not take action.

Richard Griffiths, the chief executive of the British Poultry Council, had on Tuesday urged the government to act, saying the gas shortages could affect the slaughter of up to 20 million birds a week in the UK, most of which were chickens.

Ian Wright, the chief executive of the Food and Drink Federation, had said the potential shortages of CO₂ were “a real crisis” and added: “The just-in-time system which underpins both supermarkets and the hospitality industry is under the most strain it has ever been in the 40 years it has been there.”