The business secretary, Kwasi Kwarteng, has been locked in talks with the US firm CF Industries after it stopped work at its fertiliser plants because of the surge in gas prices.
It emerged on Tuesday night that the government will provide “limited financial support” for CF Fertilisers’ operating costs for three weeks while the CO2 market adapts to global gas prices.
The Department for Business, Energy and Industrial Strategy said the “exceptional short-term arrangement” with the US-owned firm would allow the company to immediately restart operations and produce CO2 at its Billingham plant in Teesside.
Earlier, Kwarteng suggested that the government could be willing to provide the industry with support to restart after warnings that a shortage of the gas could cause food supply problems.
“Time is of the essence, and that’s why I spoke to the chief executive, speaking to him twice in the last two days, and we’re hopeful that we can get something sorted today and get the production up and running in the next few days,” he told the BBC.
In a sign that taxpayers’ money could be used, Kwarteng said: “It may come at some cost, we’re still hammering out details, we’re still looking at a plan.”
The closure of the fertiliser factories has led to a food production crisis, as food-grade CO2 is a byproduct of production and is used to stun animals for slaughter, as well as in baking and packing meat, dairy and salads.
Boris Johnson said the government was taking “direct steps” to safeguard CO2 supplies, although the government has not formally confirmed a deal.
Retailers and suppliers had given warning 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, on Tuesday urged the government to act, saying the gas shortages could affect the slaughter of up to 20m birds a week in the UK, the vast majority of which were chickens.
“It will be a real challenge if there is a shortage of CO2 to the point that slaughterhouses cannot process the birds. That is really the worst-case scenario, which is why we are so hopeful that the government can step in here.”
The National Farmers’ Union called for urgent clarity over what had been agreed. Minette Batters, the union’s president, said: “While it’s good to hear there may be an agreement in principle that production at the fertiliser factories may restart, with resulting CO2 supplies, it’s important this restart is meaningful and sustained.
“Users of carbon dioxide were given little to no warning that supplies were going to be cut off – an indication of market failure in a sector supporting our critical national infrastructure. Urgent clarity is needed on the detail, including timings and volumes established in the agreement.”
Ian Wright, chief executive of the Food and Drink Federation, told BBC Radio 4’s Today programme that the potential shortages of CO2 were “a real crisis” and said: “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.”
After news of a potential deal to restart CO2 production emerged, affected businesses said there were still likely to be short-term problems with supplies.
“We don’t yet have the detail, but if production can restart at appropriate scale before the end of the week, this should be enough to ensure pig and poultry production can continue at close to normal,” Wright said.
Gavin Partington, the director general of the British Soft Drinks Association, said: “We are encouraged by this latest development.
“It’s possible that supply of certain products won’t be as abundant as usual over the next week or so, but this should only be a short-lived situation. However, we need more than a temporary fix – it can’t be right that a company whose products are critical to the food and drink supply chain can be allowed to close without adequate warning or apparent consideration of the wider impacts. ”
Andrew Opie, director of food at the British Retail Consortium, which represents all the major supermarkets, said: “We welcome the announcement of a deal to get CO2 production back to normal levels. By taking decisive action on this important issue, the government will help prevent availability issues arising from CO2 shortages.”