Carbon dioxide supply deal agreed between government and industry

The government has struck a deal with a key carbon dioxide producer in the UK to continue supplies of the gas which is vital to food and drink production.

It comes after a dramatic spike in gas prices prompted some producers to shut down, choking off CO2 supplies.

Meanwhile, the Treasury and the business department are in talks about possible support for other firms.

It follows Treasury briefings on Sunday denying any such negotiations were underway.

Under the CO2 deal, the government said the industry had agreed new terms that would run until January 2022.

A government statement said: "CO2 suppliers have agreed to pay CF Fertilisers a price for the CO2 it produces that will enable it to continue operating while global gas prices remain high, drawing on support from industry and delivering value for money for the taxpayer."

The agreement meant industry could have confidence that it would receive future CO2 supplies, without further taxpayer support, the statement said.

US-owned CF Industries recently suspended production at two sites which make 60% of the UK's commercial carbon dioxide because of a sharp rise in gas prices.

The US firm said it now expected the UK government and industrial gas customers to "develop robust alternative sources of CO2 as part of a long-term solution for meeting demand in the country."

Last month it emerged the British food industry would be forced to pay five times more for carbon dioxide as part of a government deal with CF Industries to restart production in the UK.

The government agreed in September to pay out tens of millions of pounds to CF Industries to reopen the Billingham plant.

Environment Secretary George Eustice said carbon dioxide prices would rise from £200 per tonne to £1,000.

Support for other industries hit by soaring gas prices is also being discussed in government. Asked if talks are underway between the Treasury and business ministers, a Number 10 spokesperson said: "Treasury officials are involved in this - as are officials across government."

On Sunday, Kwasi Kwarteng told the BBC's Andrew Marr programme the situation was "critical" and said he was "looking to find a solution".

"We already have existing support and we're looking to see whether that's sufficient to get us through this situation," he said.

Mr Kwarteng said there were Treasury talks about support measures to ease the impact on firms. However, a Treasury source later said the business secretary had been "mistaken".

On Monday, industries made another appeal to the government for action.

Talks with business ministers will continue on Monday over a crisis that has sparked warnings about some factories.

Sectors such as ceramics, paper and steel manufacturing have called for a price cap, though talks with government on Friday failed to reach a solution.

Mr Kwarteng will not be involved directly at Monday's talks with industry representatives, according to BBC political correspondent Adam Fleming.

Business minister Lee Rowley will lead the meeting with industry representatives later this afternoon, and is having another meeting with steel bosses on Tuesday.