Supply Shock: CO2 Plant Reopens Amid Iran War Fears
UK invests £100M to restart CO2 plant amid supply disruption fears from the Iran war, aiming to protect food production and energy-linked industries.
The UK government is set to invest £100 million to reopen a shuttered plant. This facility produces carbon dioxide (CO2). This move is part of an emergency plan designed to address supply disruptions caused by the ongoing conflict in Iran.
The Department for Business is expected to announce on Thursday that a site located in Teesside—operated by Ensus—will resume operations. This plant was shut down last year.
CO2 is a critical component in the production of food and beverages. It is used to stun animals prior to slaughter, in food packaging to preserve freshness, and for carbonation in fizzy drinks.
The plant produces bioethanol; CO2 is generated as a byproduct during this process. It was originally closed following a trade agreement between the government and the United States. Under this agreement, tariffs on the import of US ethanol into the UK were lifted.
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The *Financial Times* was the first to report this decision. It is believed that this step was taken, in part, due to concerns among European fertilizer manufacturers regarding rising energy costs—companies that also produce CO2 as a byproduct.
Both the Department for Business and Trade and Ensus declined to comment on the matter.
Since the commencement of military operations against Iran by the US and Israel on February 28, oil and gas prices have surged.
Tehran has effectively blockaded the Strait of Hormuz—a vital maritime route through which one-fifth of the world's total oil and gas supply passes.
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In 2021, the UK food and beverage industry faced a severe shortage of CO2. At that time, wholesale gas prices were skyrocketing, and fertilizer manufacturers were grappling with escalating production costs. The following year, supply-related issues and mounting cost pressures resurfaced.
In May of last year, the government concluded a trade agreement with the United States. Under this agreement, the 19% tariff on ethanol imports—applicable to volumes of up to 1.4 billion liters—was removed. At the time, this volume was roughly equivalent to the size of the UK market.
Vivergo Fuels, a bioethanol production plant owned by Associated British Foods, ceased operations. Meanwhile, the Ensus plant also shut down. Reeves is devising a scheme to provide assistance with electricity bills to those who are 'most in need.'
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