IPCC AR6: High Hopes For Oil & The US + China & The Rest Of Us

By Debra Tan, Chien Tat Low 24 April, 2022

What's our best chance to stay within 1.5C? Check out CWR's key takeaways from the latest IPCC AR6 WG3 report on climate mitigation

To stay within 1.5C with little or not overshoot, GHG emissions need to peak by 2025 the latest & fall by 43% below 2019 levels by 2030 -high tasks but doable; emission cut now are better than removal later as carbon capture tech is still not promising
For the first time IPCC spent a whole chapter on the consumer demands; rapid fossil fuels phaseout including oil & gas remains the clearest path to cut emissions yet the world's top 60 banks has financed US$4.58trn on fossil fuels post-Paris
Other Industries also need to deliver cuts especially fossil fuel derivatives e.g. steel, cement & plastic yet emissions from international shipping & aviation are not included in the IPCC; no excuse for large emitting countries to deliver rapid deep cuts

So, IPCC’s third and final report of its 6th Assessment by the Working Group III (AR6 WG3) on “Mitigation of Climate Change” is finally out after much squabbling over the language and what should be included in the final draft of the Summary for Policymakers (SPM). The squabbles were over oil & gas and we can see why, as the science in the 2913 page tome relating climate change to the supply of fossil fuels as well as its derivative sectors is sobering.

The message is still there – we have a lot to do to get to 1.5ºC & we have to do it fast

As a result of the pushback, we’ve ended up with a less punchy summary document compared to the earlier two IPCC reports but the message is still there – we have a lot to do to get to 1.5ºC and we have to do it fast – rapid deep cuts from every sector (especially oil & gas) as well as everyone is needed.

What else is clear is that it’s not only China and India that should step up coal cuts, but that the US, as the largest producer of oil & gas globally, should walk the talk and lead oil & gas cuts. The report also reminds us that the US, Canada & Europe, after having got rich off empire building emitting 39% of cumulative anthropogenic emissions since 1850, should really deliver climate justice they tout to the rest of the developing world and vulnerable small island states.

If you don’t have time to read the report read on for our key takeaways …

Multiple ways to get to 1.5ºC … but only one gives us the best chance for an adaptable future

First off, the IPCC report is clear – our current commitments and policies put us at around 3ºC by 2100. So there’s serious heavy lifting to be done across all industries to accelerate transition for 1.5ºC by 2100. Fossil fuels, being the largest contributor to man-made emissions, must make major cuts.

But before we get into that, it’s worth remembering that there are multiple ways to reach the Paris Agreement target of 1.5ºC by 2100. We could do the hard work and urgently push for deep rapid cuts to get to 1.5ºC with little or no overshoot by 2100. Or we could proceed at the current glacial pace to overshoot 1.5ºC maybe by as early as 2030 and then bring warming back down with carbon dioxide removal (CDR) tech that we have yet to perfect to suck up emissions on a massive scale; and replace oil with “new fuels” such as hydrogen, which could still be made from oil but with carbon capture.

Carbon capture tech is hardly promising…

…Canada spent US$5.8bn on it but has only captured 0.05% of its emissions

Carbon capture in the oil industry is not a new tech. After 30 years, it is still nowhere near the scale of where its needs to be – so are we confident that we can make it work in the future? In Canada (a country that says it cares about climate change plus can afford the tech) despite at least US$5.8bn of subsidies for carbon capture, utilisation and storage (CCUS), the tech has only captured 0.05% of “green and rich” Canada’s emissions. This is hardly promising … surely, we should not bet our planet on some tech that doesn’t work to scale and has to be perfected somehow sometime in the future.

Overshooting 1.5ºC is a big no-no & lock-in a whole swathe of threats…

Also, our planet does not work like that. It is crystal clear from IPCC’s AR6 WG2 report on “Impacts, Adaptation and Vulnerability” that overshooting 1.5ºC is a big no-no and will lock-in a whole swathe of threats that we may or may not be able to adapt to.

Think sea level rise of 2m by 2100 or even as early as 2060 if continued warming on our current 3ºC path triggers rapid ice melt in Antarctica. Once set in motion, these processes are irreversible – seas will continue to rise even if we stopped warming. However, we can slow it down to buy us more time to adapt.

So, make sure you have the right context – the first two IPCC SPMs are must-reads alongside the 3rd report. You can catch up on our summary of the first report on physical science here and the second on impacts, adaptation & vulnerability here (for impacts) and here (for adaptation).

Emission cuts now are better than removal later; carbon capture must be a parallel strategy

On climate change pathways and actions – you just need to remember: a bird in hand is better than two in the bush – emission cuts now are better than removal later. But don’t get us wrong, we are not saying that CDR is not an option – CDR must be a parallel strategy because we cannot get to net zero without it. We must absolutely pour lots of money into CDR to make sure it can be scaled for real but until that point, we must look for real deep cuts everywhere to slow down warming. So where can we start? Read on …

Desperately seeking Rapid Deep Cuts now!

When it comes to cuts the report basically says not all cuts are equal – cutting various types of greenhouse gases (GHG) have different implications but we won’t get into this here because any and all cuts are good at this eleventh hour.

The faster the better is another thing to remember when it comes to cutting emissions as there is a narrowing window of opportunity to stay within 1.5ºC which keeps threats to adaptable levels. This means that the quickest way to get us out of this hot mess is rapid deep cuts from aggressive renewable expansion and embracing nuclear power to transforming business as usual to net zero and circular economies.

How deep & how fast?

Limiting warming to 1.5ºC with little or no overshoot require GHG to peak by 2025 & fall to 43% below 2019 levels by 2030…

To stay within 1.5ºC with limited or no overshoot, our annual GHG emissions must be no more than 31GtCO2 by 2030 and 9GtCO2 by 2050. Our current annual GHG emissions are about 55GtCO2 (2019 levels) so we will need to cut 24GtCO2 or a 43% reduction by 2030 – this equates to a 3GtCO2 cut every year for the next 8 years.  Plus, the report says ideally we should also peak GHG emissions by 2025 at the latest for 1.5ºC with limited or no overshoot.

=deep cuts of 3GTCO2 every year in just 8 years

So, can we peak emissions by 2025 plus deliver deep cuts of 3GTCO2 every year in just 8 years? Well, COVID brought 2.3GtCO2 of emission cuts in 2020. So, 3GtCO2 per year is definitely doable if we are willing to continue with 8 consecutive years of “COVID lifestyles”. But then again, in 2021, our emissions sprang back up to higher than 2019 levels as we started to head back to business as usual … so much for the US/UK led intentions of “Building Back Better”.

Nevertheless COVID has shown us that significant levels of emissions cut through lifestyle changes are possible …

People power – demand-side management of emissions is an untapped potential

For the first time ever in IPCC’s history, there was a chapter on demand side management of emissions. Cutting back consumer demand can bring serious cuts if there are collaborative efforts. These can be upped if tech/policies make it easier for people to change their consumption behaviours. According to the co-chair of the WG3 report, Priyadarshi Shukla, 40-70% of GHG emissions cuts are achievable by 2050 given the right conditions.

For the 1st time IPCC dedicated a chapter on consumption & lifestyles…

…small changes can make a big difference

We couldn’t agree more! While the IPCC report does not provide you with a list of things to do, we have you covered with our latest report “Together We Can”. The report clearly shows how we as individuals can help cut carbon emissions with only small changes to our lifestyles.

And these small changes can make a big difference – did you know that if enough of us made simple habit tweaks across eight areas of our daily life from food, online shopping to internet surfing plus more, we could save more than two gigatonnes of GHG emissions – this is equivalent to the combined 2015 GHG emissions of Japan and South Korea!

So don’t let the political obstacles and challenges highlighted in the IPCC report stop you from taking climate action.  Start your own climate hero journey now with our habit tweak guide – there’s a whole range of habit tweaks that are so simple, anyone can do it, and you will be amazed at what you can save individually and even more so as a group!

Climate change is man-made so we can un-make it. “Together We Can” as consumers, drive businesses across sectors toward green and circular economies; it’s up to us to demand the faster transition we need from industry, especially the fossil fuel sector …

Fossil fuels cuts: Oil & Gas need to do their fair share

In 2019, over a third, the largest share by far of net anthropogenic GHG emissions came from the energy supply sector. So cuts in this sector will offer the biggest gains.

Oil & gas account for 56% of fossil fuel CO2 emissions vs. coal’s 44% in 2019

We are already all on the same page with cutting coal emissions leaning hard on China and India but why not curb oil & gas as well? After all, according to the AR6 WG3, oil & gas account for 56% of fossil fuel CO2 emissions in energy sector compared to coal’s 44% in 2019. So even if we were to “end coal”, we will still have a problem with oil.

Spend oil & gas subsidies on renewables and helping poor nations adapt instead!

There are some who say the current war on Ukraine could be a tipping point for the oil & gas sector as big oil is taking losses in Russia. Indeed, Shell has issued warnings that it could write off around US$5bn, but what is US$5bn when subsidies to support oil & gas run into the hundreds of billions.

 G20 subsidised US$522bn in oil & gas in 2019…

…yet the richest nations can’t find US$100bn/y they promised to vulnerable nations for adaptation

Annual subsidies poured into oil & gas sector are huge. In 2019, 82% of just the G20’s fossil fuel subsidies went towards oil & gas – that’s around US$522 billion. Yet the richest nations still cannot find US$100bn per annum they promised to vulnerable nations for adaptation for the last 12 years.

With just the 2019 monies spent on oil & gas subsidies, we could have also fast tracked the installation of 838GW of solar power – this is 2x the current installed capacity of India. So richer nations can absolutely fast track renewables plus help poorer nations adapt if they really wanted to … but do they?

Are our global leaders even trying to “end oil”? It would appear not … because while John Kerry is calling for urgent action on the back of the AR6 WG3 saying: “The stakes are clear … Complacency will be met by irreversible and unthinkable impacts from climate change”, US banks were quietly pouring billions into fossil fuels in the first three months of this year …

US banks lead the banking on climate chaos

Banks (while generally shirking coal) are still pouring billions into the oil & gas sector. According to Bloomberg Green, with high oil prices, there’s less need to raise bonds to finance the sector but even then, in the first quarter of 2022 alone, US$37.6bn of bonds were raised by fossil fuel companies. These were not classified as green bonds going toward transitioning the sector. Banks led by JPMorgan Chase & Co., BNP Paribas SA and Bank of America Corp., raked in US$319mn in fees from selling fossil fuel bonds, Bloomberg Green reported.

With these numbers you start to wonder if the sector or its bankers are taking climate change threats seriously.

Post-Paris, fossil fuel financing from the world’s 60 banks reached US$4.58trn…

…the top 4 US banks lent >1.6x (US$1.17trn) than 13 Mainland China banks (US$738bn)…

It doesn’t look like it … According to “Banking on Climate Chaos”, a report released in March 2022, in the six years since the Paris Agreement in 2015, fossil fuel financing from the world’s 60 largest banks reached US$4.58trn. Last year, whilst the UN was declaring a code red planetary climate emergency, fossil fuel financing amounted to US$742bn – shocking.

Despite all the bad press around China and India still spending on “bad coal”, it is clear from the stats that, the worst offenders are US banks, with two Japanese banks featuring in the top 10. In fact, since Paris the 13 Mainland China banks lent US$738bn, accounting for 16% of the total lending to fossil fuels. While this is sizeable, the Top 4 US banks lent 1.6x more (US$1.17trn) in the same 6 years.

As for India, bank lending to fossil fuels was US$27bn for the same period, but there was only one bank from India included in the analysis compared to 13 from China.

…12 banks from the US & Canada lent US$2.16trn, while 25 banks from Europe lent US$1.16trn

Interestingly, it is the Global North that was still pouring money into fossil fuels post-Paris. The 12 banks from the US and Canada lent a total of US$2.16trn, while 25 banks from Europe, the “ESG leader”, lent US$1.16trn. Even if we counted HSBC as part of the China cohort, China still only accounts for 19% of total lending to fossil fuels compared to Europe’s 22% without HSBC.

It’s time to call a spade a spade – especially since charts in the IPCC report clearly show that the US is the biggest GHG per capita emitter by far at 19t per pax/year, followed by Australia, Japan and New Zealand at 13t per pax/year and then Eastern Asia (China, North and South Korea, and Mongolia) at 11t per pax/year. If China is not doing enough, then big oil plus the US, Australia, Japan and New Zealand are even more deficient; climate justice demands they should all be doing so much more.

And banks/governments need to stop financing/subsidizing fossil fuels. The IPCC is clear 1.5ºC with little or no overshoot is not possible without serious changes in the fossil fuel sector: “Projected cumulative future CO2 emissions over the lifetime of existing and currently planned fossil fuel infrastructure without additional abatement exceed the total cumulative net CO2 emissions in pathways that limit warming to 1.5°C (>50%) with no or limited overshoot.”

Other Industries also need to deliver cuts – especially fossil fuel derivatives: steel, cement and plastic

The AR6 WG3 also highlights a push to reduce emissions from “Industry” which account for another 24% of global GHG emissions in 2019. The SPM says that “net zero emissions from the industrial sector are challenging but possible.”

Industry accounts for 24% of GHG emissions 2019 so a re-haul is necessary

However, this “will entail coordinated action throughout value chains to promote all mitigation options, including demand management, energy and materials efficiency, circular material flows, as well as abatement technologies and transformational changes in production processes.” In short, a re-haul is necessary.

It then goes on to specifically name “steel, cement and plastics” – not surprisingly, all these industries are extensions of the fossil fuel industry. So the fossil fuel industry’s contribution to climate change is greater than just over a third from energy supply.

But we can’t just blame it on the fossil fuel industry, we, the end consumers want it. Oil for plastics production has been growing greatly; this is partly driven by F&B (think bottled water and all that plastic packaging) and partly by fashion.

Did you know that in 2015, 2.5% of global oil produced is used by the fashion industry thanks to the rise of fast fashion and atheleisure? Synthetic fibres – a plastic derived from oil – account around two-thirds of fibres used by the fashion industry.

2.5% of global oil produced is used by the fashion industry, more than all oil production from Qatar, Indonesia & Malaysia combined

We all know that Qatar, Indonesia and Malaysia produce lots of oil but fashion sucked up more than their production combined in that same year – fashion is literally frolicking in oil. 

And we haven’t even started on issues with micro-plastics shed from synthetic fibres and its impact on our health and our oceans. On this front, do check out the newly released tome on ocean pollution “The Invisible Wave – Getting to zero chemical pollution” released by Economist Impact and The Nippon Foundation.

So, think twice when you next put on your stretchy yoga pants! Or buy plastic bottled beverages or plastic anything. Remember Reduce is better than Recycle.

Food waste and cutting agriculture emissions

Another big emitter is agriculture, forestry and other land use (AFOLU) accounting for 22% of 2019 GHG emissions. It is the 3rd largest culprit after energy supply & industry.

The AR6 WG3 says that while AFOLU mitigation options, when sustainably implemented, can deliver large-scale GHG emission reductions and enhanced removals” theycannot fully compensate for delayed action in other sectors.”  So achieving more cuts with AFOLU doesn’t mean slacking off on fossil fuel or other industry cuts.

The report also touched on food choices. Eating less meat does help – according to the report, 5.2% of the US’s household’s footprint is due to meat consumption. So bring on alt proteins if they help wean us off meat.

Tackling food waste can deliver global cuts of 2.1GtCO2…

Consumers’ choices matter from diets, fashion to online shopping…

Tackling food waste is another important component and can deliver global cuts of 2.1GtCO2 (range 0.1-5.8GtCO2). While business interests in agri and F&B sectors may be reluctant to change portion sizes or the way food is grown, we as consumers can bring about these changes through our choices – check out simple habit changes you can make to Rethink Diets and  Cut Food Waste – 2 of the 8 action areas in our report “Together we can”. And while you are at it you might as well help Slow Down Fast Fashion and Tweak Online Shopping

The rich emit more and can make deeper cuts

“It’s not fair” and “the poor will suffer most” definitely hit you throughout this IPCC report. Basically, it’s the rich’s fault – The IPCC states with high confidence that “Globally, the 10% of households with the highest per capita emissions contribute 34-45% of global consumption-based household GHG emissions.” The bottom 50% contributed 13-15%.

According to the Chapter 2 of AR6 WG3 report: “The lifestyle consumption emissions of the middle income and poorest citizens in emerging economies are between 5-50 times below their counterparts in high-income countries”. It’s no surprise then that the IPCC expects climate finance from these richer countries to drive a successful transition. And this is totally possible since the G7 produces around a quarter of oil and 29% of gas.

43% of historical anthropogenic CO2 emissions for 1850-2019 came from the US, Canada, Europe, Australia, NZ & Japan…

…yet they only account for 15% of the world population

Besides the report states that 43% of historical anthropogenic CO2 emissions for 1850-2019 came from the US, Canada, Europe, Australia, New Zealand and Japan; yet they only account for 15% of the world population.

We hope that the IPCC is right, but given that the Top 10 Banks financing fossil fuels since the Paris Agreement are still from these exact regions, the outlook does not look promising nor fair. Basically, developed countries got rich off eating up the carbon budget, so it is only fair that they help the poor nations transition and adapt otherwise the “climate justice” they champion are just hollow words.

China is also a key player here. Although not yet developed, it is heading there as is the rest of Asia (South East Asia and South Asia). And because the continent is so populous, we only need a small percent of “Crazy Rich Asians” to make up the emissions of a small nation.

You know who you are … so plant lots of trees, buy legit carbon credits and throw money at CDR or green cement before you fly round the world in your private jet. Plus please don’t waste food in those weeklong wedding banquets or Michelin feasts and do try and get your champagne, oysters and caviar locally and not flown in …because international flights are not included in the AR6 WG3 mitigation pathways.

MIA – international shipping and aviation …

Remember … “Emissions from international aviation and shipping are not included” in the GHG emissions pie per the IPCC report. International aviation and shipping accounted for 2% of the cumulative anthropogenic CO2 emissions for 1850-2019. This doesn’t sound like a lot but looking at the numbers in the IPCC report, it is the same share as the entire oil-rich Middle East.

Aviation & shipping accounted for 2% of the cumulative anthropogenic CO2 emissions for 1850-2019, which is the same share as the entire oil-rich Middle East

To resolve these emissions, the IPCC notes that “Sustainable biofuels, low emissions hydrogen, and derivatives (including synthetic fuels) can support mitigation of CO2 emissions from shipping, aviation” as well as heavy-duty land transport but only with medium confidence as production process improvements and cost reductions are needed.

Hydrogen is touted as a possible future fuel especially in shipping, but the report urges caution that only if it is “green hydrogen” produced using green energy or blue hydrogen made from oil but with CCS. Again we are back to the CCS which may or may not be possible.

Here, it seems apt to bring up concerns over the oil & gas sector’s influence on the IPCC report raised by The Guardian  – that one of the lead authors of Chapter 12: Cross sectoral perspectives is from Saudi Aramco and a review editor of Chapter 6: Energy systems is from Chevron. Not surprising, the article was titled  IPCC: We can tackle climate change if big oil gets out of the way .

Anyway, we have circled back to oil yet again. So not only are fossil fuel emissions “hidden” in industry (cement, steel and plastics), the oil sector continues to get a “free pass” with the non-inclusion of emissions from international aviation and shipping.

China must play its part in delivering on its pledges…

China has accounted for a large chunk of rising emissions but it has also attributed to its slowdown. The AR6 WG3 SPM notes that the “Average annual GHG emissions during 2010-2019 were higher than in any previous decade but the rate of growth between 2010 and 2019 was lower than that between 2000 and 2009.” Interestingly, the slowing of global emissions growth “was primarily triggered by substantial reductions” of emissions growth in China.

The slowing of global emissions growth “was primarily triggered by substantial reductions” of emissions growth in China

But still China can and must do more. To this end, China has published an ambitious “1+N” Policy Framework ,which sets out principles to guide its future actions to achieve dual carbon targets: 1) to peak carbon emission by 2030, and 2) to achieve carbon neutrality by 2060. See diagram below on key areas of “1+N” and check out our interviews with Dr Zhanfeng Dong on the nation’s path towards peak emissions and where China is with its carbon markets as part of the “1+N” plan.

1+N does not just focus on the energy sector, but calls for all-out holistic transition across multiple sectors. So, it also influences green finance as well as CSR practices in China – see how in the Top 10 Trends for Sustainable Investment in 2022 as well as Top 10 Trends for CSR in China this year.

But it’s not just China that has to deliver on its pledges, developed countries must also play their part. The AR6 WG3 notes that developed countries on the whole “have not managed to reduce GHG emissions substantially” over the past several decades. Everyone needs to up their game. Here, we believe the US must lead by example …

The US is the key to unlocking rapid deep cuts

Contrary to popular belief, it is not Saudi Arabia but the US that is the #1 producer of oil. The US is also the #1 producer of gas by far. And we assume it will maintain this role, if not widen its lead on both commodities as Europe weans off oil & gas imports from Russia.

The Ukraine war has shown us that it is not possible to just turn off the taps. Just like we will still need coal despite calling to end coal, we will still need oil and gas despite aiming to end oil, which is why CDR is so important in delivering net zero.

US is perfectly positioned in leading rapid deep cuts…

On this front the US is perfectly positioned – it is the clear leading producer of global oil and gas; it has the most advance tech in the world; it has the money to bring it all to fruition; plus politically, it is already leading the global call to action. The US Special Presidential Envoy for Climate John Kerry said that the final and last instalment of the IPCC report “represents a defining moment for our planet”.

There should be no more excuses … and we are all counting on the US, because the rest of us will not be able to get to 1.5ºC with little or no overshoot without America, or Americans making lifestyle changes. Only time will tell if the US takes its own advice seriously by delivering some deep cuts.

Further Reading

More on Latest

  • China’s Path to Peak Emission Regions – Are Chinese provinces set to meet carbon emission peak ambition by 2030? Dr Zhanfeng Dong from the Chinese Academy for Environmental Planning lists out leaders & laggards and unveils what’s on their action list
  • What’s next for Carbon Market in China? –What’s the latest on China’s carbon trading market? How will it align with China’s ‘Dual-Carbon Goals’? Dr Zhanfeng Dong from the Chinese Academy for Environmental Planning explains
  • 2022 Top 10 Trends in Responsible Investment in China – China leaps forward with its carbon targets. What does this mean for green finance, ESG & more? SynTao shares their top 10 trends for responsible investment in China for 2022
  • Top 10 CSR Trends in China 2022 – What does China’s common prosperity policies mean for corporate social responsibility in China? Find out and more as SynTao shares Top 10 CSR Trends in China for 2022
  • Why Seaweed Growers Need to Stay Rooted in Science – Despite seaweed’s hype, the industry is largely underfunded. What must be done to harness its full potential as a climate solution? Megan Howell captures the conversation at The World Ocean Summit
Debra Tan
Author: Debra Tan
Debra heads the CWR team and has steered the CWR brand from idea to a leader in the water risk conversation globally. Reports she has written for and with financial institutions analyzing the impact of water risks on the Power, Mining, Agricultural and Textiles industries have been considered groundbreaking and instrumental in understanding not just China’s but future global water challenges. One of these led the fashion industry to nominate CWR as a finalist for the Global Leadership Awards in Sustainable Apparel; another is helping to build consensus toward water risk valuation. Debra is a prolific speaker on water risk delivering keynotes, participating in panel discussions at water prize seminars, numerous investor & industry conferences as well as G2G and academic forums. Before venturing into “water”, she worked in finance, spending over a decade as a chartered accountant and investment banker specializing in M&A and strategic advisory. Debra left banking to pursue her interest in photography and also ran and organized philanthropic and luxury holidays for a small but global private members travel network She has lived and worked in Beijing, HK, KL, London, New York and Singapore and spends her spare time exploring glaciers in Asia.
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Chien Tat Low
Author: Chien Tat Low
Low has extensive inter-disciplinary research experience, which although wide-ranging, focuses on identifying hotspots to facilitate better planning. At CWR, Low uses spatial modelling and statistical analysis as well as remote sensing, cartography, and geo-statistics to map and assess water risks. In addition, he helps manage CWR’s extensive network of contributors and partners. CWR is Low’s first foray outside academia and he hopes to apply his 12 years of scientific know-how toward enhancing the understanding of water risk in Asia, including spatial temporal variabilities of anthropogenic and natural factors on water resources. Previously, Low was a postdoctoral fellow at the University of Hong Kong where he devised methodologies to measure and benchmark the quality of urban life in an Asian context. As a certified GIS Professional, he also taught GIS and spatial analysis modules there. Low’s research on urban, human and environmental health is published in 11 prominent international peer-reviewed journals; he has also written a chapter in a book on managing environmental hazards. His PhD thesis on place effect on human well-being was prize-winning. Low is currently the reviewer editor for the journal “Frontiers in Environmental Informatics” and also reviews other international journals such as “Applied Geography”.
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