Humanity faces many challenges in the current crisis: development issues; global poverty and inequality; security of energy, food and water supplies; and a range of environmental problems which stretches far beyond limiting carbon emissions. Maintaining greenhouse gas concentrations at safe levels is just one requirement for survival but it is a prominent, important and symbolic one. Any response to it needs to be effective and, if possible, efficient in economic terms. But in order to be effective it has to be adopted and this means it must be acceptable in terms of issues such as equity, development agendas and parochial political struggles. If a framework is simple, it can more easily be tested for alignment with these other concerns.
Simplicity has other virtues too. Simplicity is important when rallying emotional support for a measure — no matter what the economic incentives might be. Inspirational ideas are usually simple. Simplicity fosters a feeling of inclusion, rather than the alienation and exclusion that results from discussions by ‘experts’. An insistence on simplicity also forces naysayers to state clearly what they object to, which clarifies the discussion immensely. We are facing a planetary emergency here and we need to be clear-sighted if we are to solve our problems in time.
Simplicity should not be confused with naivety; indeed naivety is often displayed by concentrating on some aspects of a problem in sophisticated detail while completely ignoring others. Concocting elaborations and complications may be useful for addressing technicalities and can be useful for finessing stumbling blocks in negotiations, but this process risks getting out of hand and is prone to being blind to errors which would be elementary to others less immersed in the details. Proponents of a simple system might do well to consent to discussions on elaborations only if the basis for the simple framework is agreed first.
The next section describes Cap & Share, recently selected by the UK’s Sustainable Development Commission as one of its ‘Breakthrough Ideas for the 21st Century’ (SDC 2009). Cap & Share is an example of an effective, fair, efficient and, above all, simple method for capping carbon emissions.
Cap & Share
Cap & Share (C&S) is a system for limiting the carbon emissions from burning fossil fuels (Feasta 2008); it is an alternative to carbon rations or carbon taxes. It could work on a global scale, or nationally for a single country’s economy. We’ll return to this later, but for the moment imagine a national scheme. As the name implies, there are two parts to C&S:
Cap: The total carbon emissions are limited (capped) in a simple, no-nonsense way
Share: The huge amounts of money involved are shared equally by the population
There is a trick to each of these. First the cap. This is set in line with scientific advice, at a level each year that will bring concentrations (of carbon dioxide in the atmosphere) down to a safe level. But how do we ensure this cap is met? The trick here is to go ‘upstream’. This is often explained (Barnes 2008) by the analogy of watering a lawn with a hosepipe connected to a lawn sprinkler, with lots of small holes spraying water everywhere. If you wanted to save water, you could try to block up all the holes one by one — but wouldn’t it be simpler to turn off the tap a bit? It’s the same with fossil fuels, where the sprinkler holes correspond to the millions of houses, factories and vehicles, each emitting carbon dioxide by burning these fuels. By controlling the supply of fossil fuels coming into the economy (corresponding to the tap) we automatically control the emissions that occur when those fossil fuels are burnt somewhere down the line. So instead of focusing on the emissions, we focus on the fossil fuels themselves. The primary fossil-fuel suppliers (e.g. oil companies) are required to acquire permits in order to introduce fossil fuels into the economy (by importing them or extracting them from the ground). A permit for, say, 1 tonne of carbon dioxide entitles the fossil-fuel supplier to introduce that amount of fossil fuel that will emit 1 tonne when burnt. The number of permits issued equates to the desired cap.
Next, the Share. Since the fossil fuel suppliers have to buy the permits, they will pass on this cost by increasing the fuel price. This flows through the economy (like a carbon tax), making carbon-intensive goods cost more. This sounds like bad news for the consumer. But the trick this time is to share out the money paid by the fossil-fuel suppliers, back to the people, which compensates for the price rises. There are two possible mechanisms for getting the money to the population. In one, the version called Cap & Dividend (Barnes 2008) in the US and based on the Alaska Permanent Fund, permits are auctioned and the auction revenue distributed to the citizens on an equal per capita basis. Under ‘classic’ C&S (Feasta 2008) each adult receives free of charge — say, monthly or annually — a certificate for his or her share. These certificates are then sold to the primary fossil-fuel suppliers (through market intermediaries such as banks) and become the permits. Under ‘classic’ C&S people thus receive certificates instead of money, so that if they should wish to, they can retain (and destroy) a portion of their certificates — and thus are able to reduce the country’s carbon footprint by that amount.
That’s Cap & Share in a nutshell.
To many people, however, the ‘obvious’ mechanism is not Cap & Share but either a carbon tax (discussed below) or a version of cap and trade applied ‘downstream’ where the emissions take place. Such a cap and trade system has two parts, as follows. The first applies to the fossil fuels we buy directly (petrol, gas, coal) and burn ourselves, causing emissions; these direct emissions account for half of our ‘carbon footprint’. For these direct emissions, some form of personal carbon trading is envisaged, typically based on ideas of ‘rationing’ familiar from petrol and food rationing during the Second World War. Personal Carbon Allowances (PCAs) typically involve giving an equal allowance to each adult citizen, and each purchase of petrol, oil or gas is deducted from the allowance (typically using swipe card technology). The other half of our carbon footprint consists of indirect emissions, the ’embedded’ emissions in goods and services, which arise when companies produce these goods and services on our behalf. These indirect emissions are controlled with an Emissions Trading System (ETS) for companies, such as the European Union ETS. (The EU ETS is already up and running, and has had its teething problems; but its faults — lax caps through too many permits being issued, free allocation windfalls to large utility companies, partial coverage only of the economy, leaks through dubious CDM projects — are now widely accepted and these shortcomings are being addressed in the next phase).
Taken together, PCAs and an ETS-like arrangement for companies can constitute an economy-wide scheme; variants have names such as Domestic Tradable Quotas or Tradable Energy Quotas (Fleming 2005). Under the scheme individuals or companies who use more than their allowance can buy extra from those who can make do on less, but the total amount in circulation is finite, set by the cap. This downstream approach is compared with Cap & Share’s upstream approach in research commissioned by Comhar, the Irish sustainable development commission, and carried out by AEA Technology and Cambridge Econometrics (Comhar 2008). C&S came out well from the comparison.
Benefits of Cap & Share
It is worth listing the benefits of C&S because they are so multi-faceted. Firstly, there are some obvious consequences of the way C&S works:
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Effective |
C&S delivers; it is not just an aspiration. Individual countries like the UK and blocs like the EU may have targets (and various institutional arrangements), but so far they have no mechanism to ensure that the targets are achieved. C&S guarantees a cap. |
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Fair |
The framework clearly has at its root a simple, robust form of equity. This serves as a focal point for agreement, in the same way that one-person-one-vote serves as the basis for democracy. C&S is exactly as fair as rationing would be, or more so, given the inequity typically built in to the ETS half of such systems. |
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Simple |
A typical country will have at most 100 or so fossil-fuel suppliers, so C&S is simple to operate and police. Meanwhile all other companies, and all individuals, are free to go about their lives without the need for swipe cards or carbon accounting, making their decisions based on price alone. Contrast this with the EU ETS, which has been described as ‘more complicated than the German tax system.’ |
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Fast |
A result of this simplicity is that the system is easy to introduce very quickly — and we don’t have the time to wait another decade before getting started. |
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Cheap |
This is also a direct result of the simple, upstream nature of the cap. |
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Transparent |
With scrutiny focused on the small number of fossil-fuel suppliers, there is much less scope for cheating than with a complex system like an ETS. |
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Next, there is an important political point: |
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Robust |
This arises from looking at the winners and losers under C&S. Although the payments to people compensate them for price rises, this is only true on average. If you have a lower carbon footprint than the national average, you will come out ahead: your payments from C&S will more than compensate for any price rises. People with higher than average carbon footprints will be worse off, but the skewed nature of income distributions means that there are many more winners than losers (for the same reason that there are more people on below-average incomes than above-average incomes). There is thus a natural constituency (McKibbin & Wilcoxon 2007) in favour of maintaining a tight cap, to counterbalance the vested interests that would push for a cap to be relaxed or abandoned. Indeed, C&S could be sold politically under the slogan ‘save the world — and get paid for it.’ This gives a certain robustness in the face of shocks and political events, necessary for a scheme that will need to survive for decades. (Consider, by contrast, carbon taxes. These are also simple, and a carbon tax is equivalent to an upstream cap if the tax level is set high enough. But the robustness incentives disappear if the money disappears into general taxation, and so taxes are unpopular. So it is much less likely that the tax level would be set high enough). |
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Next come some technical benefits of C&S: |
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Efficient |
Because permits are subject to supply and demand, and price signals then flow through the economy, C&S uses markets to guarantee that the cap is met with optimal economic efficiency. |
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Scalable |
C&S can operate at the level of a country, a bloc like the EU, or globally. This is discussed further in the ‘Global/International’ section below. |
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Flexible |
An upstream system can easily form part of hybrid schemes (see the next section). |
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And last but not least, C&S has some intangible, psychological benefits: | |
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Positive |
People can relax slightly, knowing that this problem, at least, is being addressed. They no longer need to feel guilty; on the contrary, the people are part of the solution rather than part of the problem. (Even the ‘losers’ mentioned above have non-monetary compensations; for example, since everyone knows that the problem is being addressed, the rich can counter criticism from environmentalists by responding, ‘my emissions are all within the cap too, so stop criticising!’). |
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Empowering |
C&S has a lack of intrusiveness and micromanagement. People are free to get on with their lives, without any need to keep to an ‘allowance’. There is no hassle and no intrusive tracking of individual purchasing transactions. Better still, people are in control: they are controlling the system rather than the system controlling them. You have control over ‘your share of the country’s carbon footprint.’ |
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Resonant |
C&S has an ‘all in this together’ feel to it, and resonates with many other movements concerned with equality (Wilson & Pickett 2009), justice and development issues; it also resonates with initiatives at a local community level, which need to have national and global frameworks in place if their work is not to be undermined. |
To summarise, we have a combination of emotional appeal, psychology and hard cash.
Of course, C&S is not the answer to everything. A framework such as C&S is a complement to, not a substitute for, measures closer to home. On the ground, people will be making behavioural changes (improving home insulation, shopping more locally, etc.) for a variety of reasons. Some of these reasons will be financial, driven by the economic incentives provided by the framework. But technology standards can help here, as can tax regimes (e.g. support for renewables), education, and efforts to envisage and communicate a low-carbon future as a desirable one. It will not be sufficient to put the framework in place and ‘let people get on with it’. But it is the framework that ensures that the numerical target set by the cap is met.
Elaborations
The basic idea of C&S is capable of embracing a number of elaborations quite easily. All these have merits, although each eats into the basic simplicity so should be undertaken with care.
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Equity |
C&S is based on simple equity between all adults. Now one can argue about whether or not this equity represents justice (Starkey 2008), and arguments can be made for adjustments to simple equity — allocating extra to rural households, partial shares to children, etc. Everyone can claim to be a special case, but equity is the undoubted starting point, just as it would be for food rations in a lifeboat. Recognising that special-case pleading could go on indefinitely, in practice there will be a compromise between adjustments that target particular groups and the simple guideline of equity. One could argue that the details of the distribution are less important than the fact that the cap is in place: the Cap is more important than the Share. But equity is an important factor in rendering the scheme publicly and hence politically acceptable, thus allowing the introduction of the cap in the first place. It may be better to keep it simple and tackle special needs with explicit, separate arrangements. |
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Scale |
As mentioned above, C&S is scalable, applicable to a nation alone, or on a global scale. But instead we could introduce C&S just for personal direct emissions, or even just in a single sector (for example, an initial introduction for the transport sector only). |
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Hybrids |
As an upstream system, C&S also could adopt a ‘hybrid’ approach (Sorrell 2008) to dovetail with an existing ETS as a transitional measure (Matthews 2008). It is thus flexible enough to accommodate other ideas — within an underlying simple framework. |
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Transitions |
Hybrids are one way of introducing C&S ‘gently’ to allay fears and incorporate learning from other schemes. Other pathways are possible too. For example, a government initially reluctant to impose a cap might introduce a carbon tax levied upstream; but this can easily morph into an upstream permit system with ceiling prices (see below), and then (by raising the ceiling prices) into an upstream cap. |
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Offsets |
Although leakage through spurious offset ‘projects’ should be avoided, offsets might be allowed against sequestration, either capture at the point of combustion or direct sequestration of atmospheric carbon dioxide (by high-tech scrubbers, or low-tech methods like biochar). |
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Extensions |
C&S is presented here for carbon dioxide, but the same principle applies to other greenhouse gases (which would be hardly feasible for a downstream system). In fact any other common resource such as a fishery could be incorporated: it is easy to maintain a cap using permits, and distribute the share to the population. This has a deep resonance with emerging ‘commons thinking.’ |
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Funds |
Some of the revenue could be kept back to fund collective projects to smoothe the transition to a low-carbon economy. There could also be a fund to help specific countries (or individuals) with adaptation. Some proposals in fact, such as Kyoto-2 (Tickell 2008), commandeer all the funds for such purposes. However, hiving off a significant fraction of the revenue undermines the ‘robustness’ incentives, and there is again a strong argument for separate arrangements to tackle these issues. C&S would complement, not replace, parallel efforts to encourage R&D, set technology standards, aid with adaptation and so on. |
International / Global
In an ideal world, C&S would operate as a global scheme, a single policy for the planet considered as a whole, A global scheme needs a global institution such as a Global Commons Trust, presumably run by the UN, to operate a worldwide system of permits (which in this case would apply to extraction of fossil fuels only, since there are no ‘imports’ from other planets), with the resulting revenue returned to the (world) population. Global schemes thus bypass nations, except perhaps as a vehicle for transmitting the funds to their populations.
An alternative approach is the international one, which seeks to add up and link together actions taken by sovereign nations. In this approach a global cap is apportioned using a formula agreed by all; each nation then operates its own scheme (such as national C&S). The apportionment formula is of course a thorny question: the formula might be based on Contraction & Convergence (C&C), promoted by the Global Commons Institute (Meyer 2000) and accepted at various times by various national governments, and under which national shares of a global emissions budget start at the current shares of global emissions and converge over (perhaps a short) time to equal per capita shares. If countries sign up to the general principle of a global cap, it is quite possible that the actual pathway ends up resembling the framework proposed by Frankel (2007), which is an ingenious set of elaborations on C&C performing a tricky balancing act of incentives. Or, as soon as the world recognises the extent of the emergency, we may be into Greenhouse Development Rights territory (Baer et al 2007) — an approach that also explicitly addresses inequality within nations. The negotiations might get messy, but the rallying cry must be simple.
Global C&S is equivalent to C&S in each nation with national caps calculated on an equal per capita basis, so the eventual destination of many global and international frameworks would be the same. Global C&S is just C&C with immediate convergence, and with ‘the permits going to the people.’
Now, global frameworks would require global institutions (and probably other things like monetary reform). Many authors regard this overruling of national sovereignty as hopelessly unrealistic — although others see climate change as a catalyst for wider reform, perhaps ushering in some form of global democracy (Holden 2002). Global institutions would seem to be an obvious long-term goal, but many would see the problem as simply too urgent and complex: we should not attempt to tackle too many things at once. Advocates of this view would stick with an international system. Of course, even international systems need global elements too: greenhouse gas concentrations are global entities and the cap must be set accordingly. Whatever one feels about this, it seems certain that the current emergency caused by humanity bumping up against the finite limits of the planet will force a reassessment of many of the tacit — but clearly unrealistic — assumptions underlying ‘conventional’ economics, politics and much else.
Which leads us finally to asking, ‘what is realistic?’
A choice of realisms
There is no sign of Cap & Share being introduced by any nation, never mind as a global scheme, any time soon (although Ireland has been considering C&S for the transport sector). Instead, government communication to the public concentrates on individual ‘small actions’: on doing one’s bit, with exhortations to switch off standby electrical equipment, use low energy light-bulbs, and calculate personal carbon footprints. There is a nagging tone and a strong implication that ‘people are the problem.’ This message fosters guilt, perpetuates ignorance and misconceptions (e.g. that climate change can be halted by recycling), and encourages the perception that climate change is not important (or else the government would be doing something serious about it).
It is easy to read into this a picture of governments scared of facing up to the truth and of telling that truth to the people. But there is some truth in government assertions that the public is as yet unwilling to curb its carbon emissions. Despite a blossoming Transition Towns movement in the UK and elsewhere which seeks to build local resilience ahead of climate change and peak oil, at the moment it appears that the majority of the population want to tackle climate change only if it isn’t too much ‘hassle,’ and only if it doesn’t cost too much money.
So, what can we ‘realistically’ hope for?
In the international arena, proposed international climate architectures (Aldy & Stavins 2007) lie on a rough spectrum from top-down formula-based plans aiming at universal participation by all nations, through to bottom-up arrangements of piecemeal actions taken by nations unilaterally. Let’s call proponents of these schemes ‘Builders’ and ‘Growers’ respectively (with no disrespect intended to either group). A Builder wants to plan, and suggests building a tower; while a Grower wants to let things happen, and suggests planting trees. Growers, pointing to game theory, say that building a tower is ‘unrealistic’. Builders, pointing to the urgent need to avert runaway climate change, say that waiting for a tree to grow is ‘unrealistic’. These are clearly different uses of the word ‘unrealistic’.
This Builder-Grower spectrum is correlated with another spectrum concerning transfers of wealth from rich countries to poor. Suggestions for allocation of the global ‘pie’ range from grandfathering (pegged to current emissions, that is, rich countries get more) through equal per capita allocations (everybody gets the same) to proposals ‘beyond’ equal per capita allocations that compensate for the legacy of historic emissions (rich countries get less). Planners’ frameworks typically involve transfers of funds, whereas unlinked and unilateral actions (by default based on grandfathering) typically don’t. Large transfers are dismissed by some in the developed world as utopian, unrealistic or unacceptable. But there is also hostility from developing countries to proposals that seem to limit their development, especially if these ignore ‘ecological debt’ (Simms 2005, Roberts & Parks 2007).
There is also a correlation with another spectrum concerning strength of caps. Should they be tight, quantity-based targets related to ‘safe levels’ of greenhouse gases; softer price-based targets balancing benefits and costs; or should targets be abandoned altogether in favour of encouraging unilateral ‘efforts’? A Grower might say that a quantity-based target, or cap, is unrealistic as costs must be taken into account. A Builder might say that any cost-benefit analysis that tries to put a price on a stable climate is unrealistic. Which sort of ‘unrealistic’ do we choose?
Price-based policies often involve ‘ceiling’ prices. To guard against the price of permits rising unacceptably high, governments undertake to issue more permits and sell them at the ceiling price. (The government may also agree to buy permits at a ‘floor’ price, should the demand for permits fall ‘too much’ and undermine green investment). A ceiling price offers to convert a quantity-based policy, based on ‘safe levels’ of greenhouse gases, into a price-based one, balancing benefits and costs, when the going gets tough. Ceiling prices are often described as a ‘safety valve’.
The safety valve metaphor conjures up the image of a steam engine or pressure cooker, where if the pressure builds up excessively it can be released before there is an explosion. By analogy the pent-up demand for permits might put excessive pressure on the permit price. (Even the phrase ‘ceiling price’ has a comforting ring of ‘limiting the anguish’ to it). Governments naturally seek the reassurance of a mechanism existing to release this (political) pressure, and this seems eminently sensible; after all, letting off steam is a benign image. Yet this image contains no hint of any external limits or constraints.
Consider instead the following story. Passengers are queuing at check-in at the airport; they are attending a coin-collecting convention and each wants to bring his coin collection along. Unfortunately there is a weight limit, and the passengers are unhappy about being refused their requests. The check-in supervisor nervously watches anger mounting, and worries that this might explode unless the weight limit is relaxed. Yet now we can clearly see the problem with giving in to this pressure: the plane crashes on takeoff. In hindsight it would have been better to face up to the metaphorical explosion — of anger, of tantrums at not getting one’s way — in order to avoid the literal explosion (at the end of the runway).
The analogy with the global climate is clear. Seemingly sophisticated arguments about ‘stock-pollutants’ notwithstanding, it is surely better to come to terms sooner rather than later with what a finite planet means. The view that it is naive to expect governments to agree to any scheme that does not have a ceiling price is offered as ‘realism’. But there is a choice of realisms here.
As debate continues, the problem is increasingly urgent as scientists point to feedbacks and tipping points. To avert catastrophic climate change we will need a mobilisation of resources akin to that in wartime, and if this mobilisation is to be forthcoming, we need to realise and accept that we are all in the same boat — and a sinking one at that, despite claims from some that “it’s not sinking at our end yet.” It is in the self-interest of all that the boat does not sink. Yes, it is political realism to recognise that the temptation is to ‘free-ride’ — to leave the effort of doing something about it to someone else — but pointing to this situation and shrugging is a wholly inadequate response. This type of realism is only a starting point. A tougher — and necessary — biophysical realism insists that this situation is addressed robustly.
A global cap may be agreed by policymakers, but should be based on science (for example as recommended by the IPCC); that is, it should be based on what is required to stop runaway climate change, not merely ‘what is politically feasible’ or ‘the extent of popular or political support’. In one sense it is tautological to say that the extent of popular support will set the cap, but the onus must be to change this support to align with scientific necessity. An emergency demands a scale of response commensurate with the gravity of the situation.
It is too easy to regard an acceptance of current political realities as pragmatic, and regard as utopian any insistence that they change. Human nature might be pretty fixed, but ‘political realities’ are more malleable. We need to think through which realism we are choosing. Some types of realism are not an option — at least not an option consistent with survival. As the residents of Easter Island could tell us, scientific realism will trump political realism in the end.
Conclusion
One of our overriding needs is for statesmanship, deploying rhetoric of the calibre of Gandhi, Lincoln, Mandela, Confucius or Churchill, to prepare the world for, and lead it into, swift and far-reaching changes. The messages are not easy, and the rhetoric will need to draw on simplicity and to extend the discussion beyond economics. Governments might engage in cool calculation, but people are inspired by rhetorical appeals to deeply held values and visceral feelings. At the moment, the populations of most countries are largely in psychological denial, ‘yearning to be free’ of the knowledge, deep down, that we are collectively on the wrong road. The abolition of slavery overrode economic arguments by appealing to basic human values. Surely averting climate chaos, and hence ensuring our survival and that of much of the natural world, is an equally inspiring goal?
Any framework such as C&S would be adopted alongside other measures, such as a push on R&D, infrastructure projects and funding for adaptation; research into geo-engineering and sequestration technologies; agreements concerning land use; and so on. We will need them all. But we will also need a dramatic change in global popular opinion — a change of world-view. Adoption of a simple, fair and realistic framework for cutting global carbon emissions — such as Cap & Share — would be inspirational, resonating with this change and with efforts to solve the other problems that face us collectively on our finite planet.
References
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