The UK government plans to allocate £100 million for the reopening of a carbon dioxide (CO2) production facility as a proactive measure addressing supply disruptions stemming from the current conflict in Iran.
Anticipated to be announced on Thursday by the Department for Business, the site located in Teesside, managed by Ensus, will recommence operations after being temporarily closed last year.
CO2 is essential in the food and beverage industry; its applications include stunning livestock prior to slaughter, extending the shelf life of packaged foods, and creating carbonated drinks.
The facility, which produces bioethanol along with CO2 as a secondary product, ceased operations following a trade agreement with the United States that eliminated tariffs on American ethanol imports into the UK.
This closure was reportedly influenced by escalating concerns regarding the increasing energy expenses faced by fertilizer manufacturers across Europe that similarly produce CO2 as a byproduct.
Significantly, oil and gas prices have soared since the military actions initiated by the US and Israel against Iran on February 28. This escalation has prompted Tehran to effectively shut down the Strait of Hormuz, a vital shipping lane that accounts for approximately one-fifth of global oil and gas transport.
In 2021, the UK food and drink sector experienced a CO2 crisis triggered by skyrocketing wholesale gas prices, which compelled fertilizer producers to confront heightened production costs. These supply challenges and rising expenses were repeated the following year.
In May of last year, the UK finalized a trade agreement with the US, which lifted a 19% tariff on ethanol imports, allowing for the importation of up to 1.4 billion liters, aligning closely with the UK's market demand at that time. As a result, Vivergo Fuels, formerly owned by Associated British Foods, was compelled to shut down, leading to the mothballing of Ensus's facility.
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