All tapped out: How the CO2 shortage is hurting the beer industry

The food and beverage industry has been hit particularly hard this year by the supply chain crisis, with shortages ranging from eggs, produce, to condiments. The latest notable shortage might sound like chemistry news, but it’s having a huge impact for beer lovers.

Carbon dioxide (CO2), one of the main ingredients in beer, gives brews and other carbonated drinks their fizz. It also helps keep your favorite beer tasting fresh. Unfortunately, breweries are having a hard time getting their hands on this important gas thanks to a host of issues.

Quick science lesson: carbon dioxide is a byproduct of both ethanol and ammonia production. Unfortunately, many ethanol plants shut down in the earlier days of the COVID-19 pandemic and haven’t reopened. More recently, U.S. ammonia plants scheduled shutdowns for maintenance.

Climate change also affected the short supply. While the demand for cool carbonated drinks and dry ice (which is also CO2) typically rises in the summer months, this year’s record high temperatures accelerated it. The growing popularity of hard seltzers also increased demand.

To add to the list of supply issues, a volcano might have also made the situation worse. This summer, an energy company discovered contamination at a carbon dioxide well in Mississippi (that also happens to be an extinct volcano).

Like many ingredient shortages we’ve seen throughout the pandemic, scarce carbon dioxide caused major issues in the supply chain. Naturally, the cost of the now hard-to-get gas increased this fall–exactly 28 percent year-to-year. This increase is a big deal for the beverage industry, which was the largest user in the carbon dioxide market in 2020.

Beer makers and suppliers have been forced to make tough decisions in the wake of the carbon dioxide shortage. For some, this meant using equipment to capture CO2 during their own brewing process. Some smaller breweries, however, had to stop production. While others considered increasing their prices or using carbon dioxide alternatives.

While the low supply of carbon dioxide ripples through the beer industry, there might be one silver lining. Breweries that adapted by recycling the CO2 from their beer production weren’t just resilient, they were also being more sustainable. That’s because this process can reduce the amount of CO2 released into the atmosphere.

Although the equipment some breweries use for capturing their own carbon dioxide isn’t new, the recent CO2 shortage might have nudged more beer makers to go this environmentally friendly route. However, because this equipment is costly, it isn’t feasible for every brewery (especially those that are already financially hurting from the shortage).

As the beverage industry continues to feel the supply chain effects of the pandemic and climate change, I’m optimistic these challenges will spur innovation and flexibility. But with carbon dioxide being so important in the production of many popular beverages, I’m hoping the industry will feel some relief soon. I know beer connoisseurs have their fingers crossed, too.

Danilo Diazgranados is an independent investor in the global food and wine, financial services, real estate, and the hospitality sectors.