By Nigel Hunt

LONDON (Reuters) – Britain warned its food producers on Wednesday to prepare for a 400% rise in carbon dioxide prices after paying tens of million of pounds to get CF Fertilisers to restart production in a deal that will last for three weeks.

Britain has been granted some breathing room to ensure that other suppliers are available in order to stop the shut down of production for a variety of foods and beverages.

Why is CARBON DIOXIDE important?

Food and beverage is the biggest user of carbon dioxide. The gas can be found in many beverages, including soft drinks and beer.

The gas is often used in meat processing to shock animals and bakers use it to extend the lives of their products like cakes and crumpets.

Other than for food and drink, the gas can also be used in medicine. This includes non-invasive surgical procedures as well to remove warts.

For example, the use of it to cool down nuclear reactors is a major consumer.

WHAT IS IT PRODUCED FROM?

Some fertilisers and other biofuels use carbon dioxide as a byproduct.

British sources of carbon dioxide include the U.S.-based CF Fertilisers’ plant at Billingham in Northeast England, and its Ince plant north-west England.

WHAT IS IT TRANSFERRED?

The carbon dioxide produced by fertilisers is sold to gas companies, such as Linde (NYSE.) and Air Liquide. These companies purify the carbon dioxide before it’s distributed to end-users.

A mixture of spot and contract sales is used to sell carbon dioxide.

WHAT IS A SHORTAGE AND WHY?

CF Fertilisers stopped production last week at two of its British fertilizer plants due to the soaring price of, a critical input in the production process.

The British wholesale gas benchmark prices for this year have tripled to new records due to a variety of factors, including low inventories, high demand from Asia and difficulties in obtaining liquefied natural gases shipments.

This has effectively taken a lot of the supply off the market. There have also been reports that carbon dioxide suppliers didn’t schedule beyond 24 hours ahead.

There are fears of production being halted quickly because many consumers have only enough gas reserves to last for a few days.

IS IT AVAILABLE FOR IMPORTS TO FIX THE SUPPLY GAP

The UK imports carbon dioxide from Norway or the Netherlands, but it seems uncertain if this supply is available. Yara in Norway announced last week that they were reducing fertiliser production because of the rising prices for natural gas. As the carbon dioxide crisis spreads, it is possible that supplies from the Netherlands will remain within the European Union.

FOOD AND DRINK PRICES WILL GO UP?

The cost of carbon dioxide is only a fraction of overall food and beverage production costs so it’s unlikely that prices will rise.

But, inflation is possible due to rising energy costs, which has led to an increase in carbon dioxide. It makes it more difficult to grow, process, and transport food.