The CO2 Budget Line That's Costing you more than you think
Why procurement teams optimising on unit price are exposing their organisations to costs many times larger
Ask most procurement managers how they evaluate their liquid CO₂ supplier and you’ll get a familiar answer: price per tonne, contract terms, and whether deliveries arrive on time.
It’s a reasonable framework. It’s also dangerously incomplete.
Liquid CO₂ is one of those inputs that sits quietly in the background — manageable, unremarkable, easy to commoditise in a tender — right up until the moment it isn’t there. And when it isn’t there, the costs that land on your organisation don’t show up on any gas invoice. They show up in your production reports, your customer penalty clauses, your logistics overtime budgets, and eventually your P&L.
The gap between what organisations pay for CO₂ and what a CO₂ disruption actually costs them is one of the most consistently underestimated risks in industrial procurement. This piece tries to put some shape around it.
The Unit Price Illusion
Procurement teams rightly focus on getting competitive value on unit price. A well-run tender process that achieves meaningful savings on CO₂ spend is a genuine win — and we’d encourage every organisation to benchmark regularly.
The problem isn’t the focus on price. The problem is when price becomes the primary — or only — lens through which supply risk is evaluated.
Consider the maths in broad terms: the savings achievable through competitive CO₂ procurement are typically measured in percentages of a relatively modest spend line. The costs generated by a multi-day CO₂ supply outage — lost production, labour standing time, perishable input waste, emergency logistics, customer penalty clauses — are typically measured as multiples of that entire annual spend.
One disruption event, in the wrong operational context, can dwarf years of price optimisation. And critically — none of that disruption cost appears anywhere near the CO₂ procurement budget. It gets absorbed across operations, logistics, and commercial, invisibly, and without any link back to the sourcing decision that created the vulnerability.
| Where the hidden costs of a CO₂ outage actually land• Lost production output: direct revenue not made while lines are down• Labour standing time: shift workers paid while lines are down• Perishable input waste: raw materials that cannot be held during a shutdown• Emergency logistics premium: spot sourcing, expedited haulage, alternative supplier setup costs• Customer penalty clauses: failure-to-supply penalties from downstream customers• Senior management time: hours spent firefighting rather than running the business• Reputational cost: harder to quantify, but real — especially with key accountsNone of these appear on your CO₂ invoice. All of them are consequences of a CO₂ sourcing decision. |
Why CO₂ Is Uniquely Exposed
Most industrial inputs have substitutes, buffers, or lead times long enough to allow contingency planning. CO₂ has almost none of these characteristics.
You cannot stockpile large volumes of liquid CO₂ the way you can stockpile dry goods or packaging. Storage is cryogenic, capital-intensive, and finite. When your on-site vessel runs low, you need a delivery — and in an allocation environment, that delivery may simply not be available.
The UK CO₂ market is also structurally concentrated. A small number of production sources — predominantly ammonia fertiliser plants and bioethanol facilities — supply the vast majority of liquid CO₂ to the market. When one large source goes offline, it doesn’t cause a small price movement. It causes simultaneous allocation across the entire downstream supply chain.
We saw this play out in 2022. CF Fertilisers curtailed production due to energy prices. The effects cascaded through food manufacturing, brewing, meat processing, and horticulture within days. Organisations with diversified supply arrangements fared significantly better than those who had optimised purely on cost.
The Procurement Frameworks That Miss This Entirely
Standard category management frameworks are well-suited to inputs where the primary risk is price movement. They are poorly suited to inputs where the primary risk is availability.
A typical CO₂ procurement exercise will score suppliers on price, delivery reliability under normal conditions, accreditations, and contract flexibility. What it rarely models is:
• What the supplier’s allocation policy is, and where your organisation sits within it
• How many independent production sources feed your supply
• What the force majeure provisions in your contract actually permit the supplier to do
• What the total cost of disruption looks like modelled against realistic outage scenarios
This isn’t a criticism of procurement teams — it’s a structural gap in how CO₂ is typically categorised. It behaves more like a utility than a commodity, but it’s rarely governed that way.
A Better Framework: Four Dimensions, Not One
A more robust approach evaluates CO₂ supply across four dimensions simultaneously:
1. Unit economics: Competitive pricing, delivery costs, tank rental and contract terms. Important — but the starting point, not the whole picture.
2. Availability risk premium: What is the realistic probability of a supply disruption in any given year, given the sources your supplier draws from? What would a disruption cost your operation per day? These numbers belong in your supplier evaluation — even as estimates.
3. Contingency and response capability: How quickly can your supplier activate emergency alternatives? A supplier with diverse sourcing and a credible emergency response protocol may represent better total value even if the headline price is not the lowest in the market.
4. Carbon and compliance cost trajectory: As Scope 3 reporting standards tighten and carbon pricing mechanisms evolve, the provenance of your CO₂ will carry cost implications. Fossil-derived CO₂ may attract a growing compliance burden that biogenic or captured CO₂ does not. This deserves a place in any forward-looking cost model.
The Conversation Worth Having With Your Supplier
The best CO₂ suppliers aren’t simply the ones who win on price in a tender. They’re the ones who help you understand your actual exposure — and build a supply arrangement that genuinely reflects it.
That means being transparent about allocation policy. It means showing you where your CO₂ actually comes from and how diverse that sourcing is. It means being willing to help you model what a disruption scenario looks like for your operation — not to generate anxiety, but to give you the information needed to make a genuinely informed decision.
If your current supplier isn’t willing to have that conversation, that itself tells you something about the relationship you’re in. Contact us today to find out more about our renewable supplies of CO2 here.
Pro Gases UK works with procurement teams across food & beverage, horticulture, manufacturing and specialist industrial sectors to build CO₂ supply arrangements that hold up under pressure — not just in normal conditions. If you’d like to talk through your current setup, contact our commercial team.