free-market - Semantic Scholar

10.1098/rsta.2002.1033

Collateral biodiversity bene¯ts associated with `free-market’ approaches to sustainable land use and forestry activities By I z a bel la K oz ie ll1 a n d I a n R. S w i n g l a n d2 1

International Institute of Environment and Development, 3 Endsleigh Street, London WC1H 0DD, UK 2 The Durrell Institute of Conservation and Ecology, c/o Herons Hall, Nash, Canterbury, Kent CT3 2JX, UK Published online 25 June 2002

Concern over the ever more rapid and widespread losses of biodiversity has instigated various remedial actions: whether in situ conservation, such as the establishment of protected areas, or ex situ, such as the conservation of germplasm in gene banks. In the past, such activities were funded and managed by the public sector; however, in recent years, public support has declined and this has spawned a growing interest in conservation opportunities that might arise from `free-market’ approaches to sustainable land use and management. The UN Convention on Biological Diversity (CBD) is the key framework for articulating policies and actions on biodiversity; however, progress in developing suitable economic and market incentives for biodiversity conservation and its sustainable use has been slow, with activities such as bioprospecting and ecotourism making some, albeit limited, headway. Given the United Nations Framework for Climate Change or United Nations Framework Convention on Climate Change’s (UNFCCC’s) high pro­ le within the public and private sectors, there is some potential for using it to help advance CBD objectives and provide the much-needed economic incentives for conservation, through some of the market-based mechanisms presented under the Kyoto Protocol. Signi­ cant potential lies in the fact that many `natural’ forests and certain other ecosystems are both major stores of carbon and areas of valuable biodiversity. Thus, any attempt at conserving these areas has the potential to yield both carbon and biodiversity bene­ ts. So far, however, the conservation of natural forests is not included in the Kyoto Protocol’s de­ nition of sinks. Instead the creation of sinks|through the establishment of fast-growing monocultures|may well lead to biodiversity losses, especially if partly degraded lands are cleared for this purpose. If real progress is to be made, our understanding of the relationship between land use and biodiversity bene­ ts needs to be improved, and more appropriate proxies for biodiversity need to be developed. At the same time, we need to have a clear understanding of the precise nature of the potential synergies and be more able to identify possible jointaction opportunities that exist between the UNFCCC, the CBD and the Convention One contribution of 20 to a special Theme Issue `Carbon, biodiversity, conservation and income: an analysis of a free-market approach to land-use change and forestry in developing and developed countries’ . Phil. Trans. R. Soc. Lond. A (2002) 360, 1807{1816

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on Combating Deserti­ cation and other international trade and economic agreements. Keywords: biodiversity; market-based conservation; Kyoto Protocol; international conventions

1. Introduction Biodiversity yields many sustainable development bene­ ts yet, paradoxically, human societies continue to undermine this valuable resource base, instigating large-scale biodiversity losses and species extinctions. Most worrying, however, is that the situation is actually deteriorating faster than resources can be mobilized to counteract the destructive processes, hence the commonly expressed view that we are heading towards a sixth `mass extinction’. In the past, remedial action has focused on in situ and ex situ conservation approaches. The establishment of protected areas has been the primary focus of in situ conservation, although there are now also moves to protect valuable agricultural zones. Ex situ conservation has focused on conservation of, for example, germplasm or certain plants or animals, away from their site of origin, e.g. in a botanical garden, zoo or a genebank. Until recently, the ­ nancing and management of conservation activity remained the responsibility of the public sector; however, over the last few decades, severe cutbacks in the availability of public resources has severely undermined the e¬ectiveness of such strategies. This, coupled with ever-increasing pressures on the land and resources held within protected areas, especially in developing countries, has constrained the lasting success of such approaches. Consequently, the conservation sector has been forced to look at alternative methods of biodiversity conservation, and especially such methods that can generate viable and desired livelihood or development returns, while at the same time conserving biodiversity. Given that the root causes of biodiversity loss are linked to poverty on one hand and high levels of consumption, or economic development, on the other, ­ nding such alternatives is not an easy task. In spite of this enormous challenge, the last decade has spawned a series of innovative approaches that focus on providing suitable social and economic incentives for conservation. It is now widely recognized that, given the lack of public funding, biodiversity conservation must start to pay for itself, otherwise it is most likely doomed. Hence the growing interest in opportunities for biodiversity conservation that might arise from `free-market’ approaches to sustainable land use and management.

2. Biodiversity and its `political’ context Biodiversity, as a word, dates back only to the mid 1980s, but it has gained rapid political acceptance. Growing awareness of the immense value of biodiversity, and the ever-increasing rate of human-induced biodiversity loss, such as deforestation, has instigated some commitment towards corrective action. By 1992, the International Convention on Biological Diversity (CBD) was open for signing at the United Nations Conference on Environment and Development, together with the United Nations Framework Convention on Climate Change (UNFCCC). The three main objectives of the CBD were articulated as `the conservation of biological diversity, the sustainable Phil. Trans. R. Soc. Lond. A (2002)

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use of its components and the fair and equitable sharing of bene­ ts arising from the use of genetic resources’. The CBD has now been rati­ ed by over 180 countries (with the notable exception of the United States, as with the UNFCCC). The CBD is now the main framework for articulating policies and actions on biodiversity at international and national level.y However, the CBD, as with many of the other biodiversity-related conventions, has not yet gained the same level of global political and private-sector interest as the UNFCCC. This, together with the many di¯ cult conceptual and operational challenges that biodiversity presents, has hampered its more widespread implementation. Given the UNFCCC’s much higher international pro­ le, there is some potential for using it to help advance CBD objectives, and provide the much-needed economic incentives for conservation, through some of the market-based mechanisms presented under the Kyoto Protocol. According to the CBD de­ nition, biological diversity (also known as biodiversity) encompasses the `variability of all organisms from all sources: : : and the ecological complexes of which they are part: : : this includes diversity within species, between species and of ecosystems’. Some have questioned the relevance of introducing yet another ecological concept, and one that seems, in the ­ rst instance, closely related to `nature’ and synonymous with biological or natural resources. However, introducing the term has helped raise the political pro­ le, especially at the international level, of a critical and previously overlooked aspect of biological science. It has also formed a more detailed and comprehensive way of understanding the value of the variety of life on Earth.

3. `Biodiversity bene¯ts’ Biodiversity is of enormous value to human development|an estimated 40% of the world’s economy is based on biological goods and services that emanate from biodiverse systems. Biodiversity (and the genetic resources it harbours) has made possible the massive increases in the production of food and other natural materials, which have fed the growth and development of human societies. It is also the basis of innumerable environmental services that keep us alive, from the provision of clean water to pollination. The consensus internationally is that the various biodiversity bene­ ts, i.e. goods and services that arise from biodiverse systems, fall into three useful categories (direct, indirect and non-use), though views on what precisely each of these includes can vary (Koziell 2001). (i) Direct-use bene­ ts accrue from the range of raw materials that biodiversity provides (e.g. di¬erent foodstu¬s, medicines, building materials and fodder for livestock). One of the most valuable aspects of biodiversity as a direct use is associated with the choices and alternatives it supports. Thus it acts as a `bu¬er’ if customary resource-use preferences change (e.g. during periods of stress such as drought). Another is the application of genetic resources in arti­ cial selection and adaptation of agricultural crops and livestock breeds for improved yield and/or pest resistance. y There are also many other biodiversity-related conventions that deal with speci¯c issues, such as RAMSAR, focusing on wetlands, and CITES, on trade in endangered species. Phil. Trans. R. Soc. Lond. A (2002)

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(ii) Indirect-use bene­ ts are mostly associated with environmental services. Biodiversity is the medium through which air, water, gases and chemicals are moderated and exchanged to create environmental services (e.g. watershed protection, pollination and soil aeration). There is much to be done to improve understanding of the relationship between di¬erent levels and types of biodiversity and the e¬ectiveness of environmental services. A perhaps underestimated indirect-use bene­ t of biodiversity is protection from pests and diseases. (iii) Non-use bene­ ts consist primarily of the option to use biological resources in the future. Maintaining diverse communities of plants and animals o¬er a greater variety of potential future uses as well as a greater capacity to evolve new forms and processes. There is also the notion of intrinsic bene­ t, which relates to biodiversity’s existence but not for any utilitarian purpose. Sometimes this might be for spiritual reasons, or for aesthetic purposes. Identifying which land- or water-management regimes yield the greatest biodiversity bene­ ts is not an easy task. Firstly, as described above, there are so many di¬erent biodiversity bene­ ts that no single land use can provide them all: hence arguments for multiple-use landscapes. Secondly, di¬erent people will prioritize different biodiversity bene­ ts, depending on, for instance, their level of poverty (or a°uence), their culture or religion, the nature of their interaction with it, or belief about what their interaction should be. Therefore, a rural agricultural community’s perception of bene­ t often lies in stark contrast to that of an urban dwelling community. Thirdly, scienti­ c understanding of precisely which biodiversity yields what sort of bene­ ts remains patchy, e.g. which species or ecosystem con­ gurations lead to more stable yields or more e¬ective watershed protection, and uncertainty about the future means that it is virtually impossible to predict which biological resources might one day be of value. To help provide some clarity, it has been necessary to identify proxies for biodiversity that are supposed to re®ect overall biodiversity and hence identify areas where biodiversity bene­ ts might be greatest. Species diversity has been one of the most commonly used units of measurement, mainly because of the ease with which some species can be recognized and also due to the recognized roles in ecosystem function that some species are known to play. There is now a bewildering array of tried and suggested techniques for assessing species-level diversity, many of which try to represent the relative importance of certain species by multiplying their individual abundances according to some preset criteria, e.g. global rarity, endemism, degree of endangerment or keystone functions. However, the goal of biodiversity conservation should be not just about maintaining the greatest number of species, but also ensuring that ecosystem and genetic diversity is sustained. For the time being, these methods are the best available; however, whether or not these proxies and methods are truly able to re®ect the range of biodiversity bene­ ts remains a moot point. Whether or not any chosen proxy is the right one is always open to debate: selection is predicated on value judgements about which facets of biodiversity matter more and which matter less and which proxies best represent them. It is important to recognize that the way in which biodiversity is viewed and assessed, and the land-use decisions that are based on these assessments, are subjective choices and only as robust as the available information. They are also Phil. Trans. R. Soc. Lond. A (2002)

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liable to change, as our scienti­ c understanding and knowledge of the relationship between land use and biodiversity bene­ t improves (Vermeulen & Koziell 2002). In any discussion on biodiversity bene­ ts, we need to be explicit about the precise nature of biodiversity bene­ ts arising and for whom they matter most.

4. Free-market approaches to sustainable land use and biodiversity bene¯ts (a) Markets for carbon o® sets The management of the land-based components of the carbon cycle could be an important part of the solution to the climate-change problem. This is because natural forests and certain other ecosystems, such as peatlands, are major stores of carbon. Alteration of such habitats means release of carbon into the atmosphere and the loss of storage functions; it also means loss of biodiversity. Expanding and improving the quality of these ecosystems can help sequester carbon. The fact that such `carbonrich’ areas are also `biodiversity rich’ o¬ers some potential for simultaneous action on biodiversity and carbon issues. However, biodiversity enhancement is not always a corollary of carbon sequestration, as the latter activities have often involved planting of biodiversity-poor monocultures. The 1997 Kyoto Protocol recognizes forest and land-use change as both part of the problem and part of the solution to greenhouse-gas reductions. It has introduced a series of market-based measures (®exibility mechanisms), which, while highly contentious, have provided a framework within which land- and forestry-based markets in carbon o¬sets could start to evolve (Trexler et al . 1999). These mechanisms include the following. (i) Article 3: Domestic Greenhouse Emission by Industrialized Countries. This article de­ nes which domestic emissions should be inventoried by industrialized countries during the 2008{2012 commitment period. Currently, it requires tracking greenhouse-gas removals and emissions from human-induced a¬orestation, reforestation and deforestation that has occurred since 1990. Forest harvesting and management has been omitted for now, but may still get included by later Conferences of the Parties (COPs). (ii) Articles 6 and 17: Joint Implementation and Emission Trading between Industrialized Countries. These articles de­ ne two market mechanisms that allow industrialized countries to trade emission reductions with other industrialized countries. Article-3 restrictions on forest activities may apply to these mechanisms. Article 6 speci­ es project-based credit trading and explicitly refers to enhancing carbon storage and reducing emissions, such as by slowing forest degradation, and tree planting. (iii) Article 12: Clean Development Mechanism. Allows industrialized countries to meet their reductions through projects in developing countries. There is no explicit mention of land-use change and forest projects, but to invoke the mechanism, it must contribute to sustainable development (WRI 1998). Given the coincidence between carbon and biodiversity issues, these mechanisms, if implemented with the necessary `clauses’ in place, have some potential to help Phil. Trans. R. Soc. Lond. A (2002)

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advance biodiversity conservation objectives through private-sector activity. Further still, the high level of international interest and concern in climate change, especially from economic interests, as compared with biodiversity conservation, could help provide the otherwise absent incentives for biodiversity conservation amongst political and economic decision makers. There have been many ­ erce debates over whether or not `sinks’ should count towards emissions-reduction targets. Concerns have focused around the fact that developed countries may simply turn to carbon-o¬set projects, without taking domestic action at source, and around how to monitor and measure compliance. However, despite the many concerns, COP-6 decided to give the go-ahead to `sinks’ even if the concept remains somehow ®awed. It was also clearly stipulated that the sustainable development criteria relating to the Clean Development Mechanism are to be articulated and de­ ned by the host country. COP-7 went on to de­ ne `sinks’ as the a¬orestation and reforestation of lands degraded prior to 1990: forest conservation was not included. The latter decisions has severely limited the potential for using the Kyoto Protocol to provide biodiversity bene­ ts, as a¬orestation biodiversity bene­ ts are likely to be minimal when compared with forest conservation activities; however, this decision is not set in stone and is due to be revisited at COP-9 after the Subsidiary Body on Scienti­ c, Technical and Technological Advice has studied the issue in greater detail. While the legal basis for carbon-o¬set projects is still being ­ nalized, there have been various carbon-o¬set projects already implemented within the land-use and forestry sector, as countries and companies move to take advantage of lower prices. There are some clear biodiversity bene­ ts arising from some, but not all, of these projects, as follows. (i) Reforestation or a¬orestation, e.g. through plantations, agroforestry or restoration of natural forests, to increase carbon sequestration. Where these activities include reforestation of pasture, cropland or degraded lands with monoculture plantations, there is a chance that valuable non-forest species and habitats found within the ecosystems to be reforested will become severely threatened. The level of biodiversity loss will, however, depend on the state and nature of the original ecosystem. For example, there are pasture lands that continue to maintain a high diversity of grass and insect species, so tree planting within such areas will result in obvious biodiversity losses. Furthermore, while there may be no biodiversity loss when degraded lands are reforested, the potential for recreating the original ecosystem will be lost, as will the original biodiversity that went with it. Restoration of natural forests may, on the contrary, o¬er biodiversity bene­ ts. (ii) Improved forest management, e.g. through reduced-impact logging (RIL), to both increase sequestration and reduce emissions. Reduced-impact logging is far less damaging on other local plant and animal species|hence local biodiversity|than conventional logging practice. Methods such as pre-cutting vines, directional felling and planned extraction of timber on properly constructed skid trails all help reduces damage to other non-commercial trees, help prevent soil erosion and vine infestation. In some forests, research suggests that harvesting damage can be reduced by up to 50%! The biodiversity bene­ ts resulting from RIL are obvious. Phil. Trans. R. Soc. Lond. A (2002)

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(iii) Conservation and protection against deforestation, e.g. through the expansion of protected areas and improved ­ re control, to cut emissions. Such activities could o¬er biodiversity bene­ ts by providing additional incentives for the enhanced protection of large tracts of forest. However, given the strong link between forest protection and reduced carbon emissions, forest areas will take precedence over other ecosystems (e.g. inland aquatic ecosystems). The latter may provide fewer carbon bene­ ts but might be more critical for furthering global biodiversity-conservation objectives. Furthermore, forests are quite well protected globally, as compared with some other ecosystems, so unless other ecosystems are factored into the carbon equation, such activities may result in yet further skewing of the global protected areas system towards forests. There is also concern that, given the strong levels of dependence on forest resources in many parts of the developing world, if certain forest areas are made o¬ limits to local people, the problem is only likely to be displaced, leading to exceptionally high rates of deforestation in nearby areas. (iv) Substitution of fossil fuels with sustainably produced biomass and improved fuelwood management to cut emissions. As with the discussion in (i) above, such substitution is likely to involve biomass plantations and the e¬ects on biodiversity are likely to be a¬ected by the location of any such plantation (i.e. the quality and uniqueness of the original ecosystem). (v) Improved soil conservation and agricultural practices, e.g. through encouraging practices such as non-burning, minimum tillage and the use of natural fertilizers and mulching, to cut emissions. Such activities all help to improve the level of on-farm biodiversity, above and below the ground, i.e. insects, soil microbes and other microorganisms. They can also help stabilize the agricultural frontier, thus slowing deforestation and concomitant biodiversity loss. Land-based carbon-o¬set projects have some potential to provide some biodiversity bene­ ts, as long as the biodiversity issues are mainstreamed into the various accounting, de­ nitional and management strategies that will arise. However, as long as forests are the prime focus of attention for such projects, this will result in forest biodiversity bene­ ts alone. While this is clearly a major step forward, as analyses have shown that species diversity is exceptionally high in forest ecosystems, improvements in scienti­ c understanding are rapidly revealing that other previously unexplored ecosystems, such as deep-sea environments, are also very rich in biodiversity. Thus carbon-o¬set projects should be seen as an important part of the conservation solution, but only as part of it. (b) Markets for genetic resources and traditional knowledge A few years ago, bioprospecting (the exploration of biodiversity for commercially valuable genetic and biochemical resourcesy) was heralded as a possible win{ win opportunity for bolstering commercial, livelihood and biodiversity-conservation goals. The recognition that these resources are of obvious importance to the agrochemical, food, pharmaceutical and cosmetic industries in developed countries, but y This can include, for example, prospecting for useful genes for crop development, medicines, insecticides, enzymes, micro-organisms, fragrances and fungicides. To date, it has been dominated by the search for pharmaceutical products. Phil. Trans. R. Soc. Lond. A (2002)

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had been collected freely in developing countries over the past few hundred years, triggered the third objective of the CBD. This provided a new regulatory instrument that aimed to promote more equitable exchange, on mutually agreed terms, of bene­ ts from access to genetic resources and associated knowledge. These provisions are proving controversial and di¯ cult to implement; they relate closely to (and sometimes con®ict with) many other policy and legislative frameworks|such as those on trade and investment, intellectual property, constitutional law and indigenous peoples’ rights. Furthermore, the likelihood of ­ nding a useful extract has been put at 1000{10 000 to 1 (Crook & Clapp 1998) and the increasing moves to synthesis means that there are fewer searches for raw materials occurring now (although this may change in future). Furthermore, for material that has been sourced from the `wild’, there are still many complex debates over the level of bene­ ts that the original holders of the unimproved material should receive and who within the source community should receive the bene­ ts (Reid et al. 1993; Ten Kate 1995). All in all, actual revenues are likely to be low, and unlikely to produce su¯ cient incentive to conserve if there are other income-generating opportunities available. That said, there have been some major deals signed. Probably the most well known is that between the government of Costa Rica (through the National Biodiversity Institute) and Merck Pharmaceuticals. A major deal was signed between the two parties that covered payments for the collection of species samples and sometimes for re­ ning them, and to provide royalty payments on any products that might be developed from such samples. There are, however, not many major deals of this nature that have been replicated in other countries, although there have been quite a signi­ cant number of smaller-scale initiatives. (c) Markets for `green’ products The recent upsurge in consumer interest in `natural’, `green’ or `organic’ food and other products and services (e.g. ecotourism) has provided some stimulus for markets in such products. More markets for such products has meant a greater proportion of land devoted to such sustainable management regimes. Various accreditation schemes have been established to address this, such as the Forest Stewardship Council’s timber-certi­ cation scheme, the Marine Stewardship Council’s evolving ­ sh certi­ cation scheme and a plethora of organic agriculture and tourism schemes. However, many of these schemes still face implementation challenges. Organic and sustainable timber or ­ sh production should yield some obvious in situ biodiversity bene­ ts, especially where high-chemical-input agricultural methods are replaced by lower-input regimes, or where high-intensity logging is replaced by RIL. However, the lack of empirical research on the relationship between such regimes and biodiversity, and the di¯ culties in identifying suitable proxies for biodiversity, means that speci­ c conclusions still cannot be drawn as to the precise nature of biodiversity bene­ ts. Furthermore, much remains to be done in terms of identifying suitable indicators for biodiversity, within the range of certi­ cation schemes.

5. Conclusions The increasing emphasis on private, as opposed to public, goods and services in development paradigms is leading to signi­ cant changes in the original biodiversity. It Phil. Trans. R. Soc. Lond. A (2002)

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also means that many of the conventional approaches to biodiversity conservation are struggling to survive. While it would certainly not be appropriate to write o¬ these conventional approaches, there is a real need to look at how they can begin to evolve and compete within in a world increasing dominated by private enterprise. This will inevitably require trade-o¬s between biodiversity and livelihood bene­ ts across much of the landscape. The challenge will lie in ensuring that these trade-o¬s are suitably balanced. In order to provide adequate safeguards, we need to be much clearer on where trade-o¬s are simply not appropriate, for instance, where biodiversity is of such `absolute’ value that it warrants no development activity at all. While some conservationists would argue that areas of absolute value have already been identi­ ed, e.g. through Conservation International’s hotspot mapping, or WWF’s eco-regions, such exercises now need to occur on a much smaller scale to be relevant for practical planning purposes. They also need to keep in tune with new insights on biodiversity provided by science. In order to ensure that free-market approaches provide suitable biodiversity bene­ ts, the following actions are proposed. (1) Greater investment in research to improve the quality of information on the relationship between land use and biodiversity bene­ ts. (2) To establish inclusive and transparent process for articulating and identifying suitable proxies and indicators that can be incorporated in the range of veri­ cation, monitoring and evaluation processes associated with free-market approaches to sustainable land use and forestry. (3) Identify and enhance synergies between the UNFCCC, the CBD and the Convention on Combating Deserti­ cation and other international trade and economic agreements. This might involve the following. (i) Ensuring that biodiversity issues are fully mainstreamed into discussions relating to the accounting methods, mitigation frameworks, de­ nitions and implementation, occurring under the Kyoto Protocol. (ii) Strengthening capacity at national level, especially in developing countries, to tackle and manage these synergies `on the ground’. This might involve identifying areas under national jurisdiction that are of both high biodiversity and high carbon value. Projects and activities aimed at maximizing both objectives could then be targeted speci­ cally within such areas.

References Crook, C. & Clapp, R. A. 1998 Is market-oriented forest conservation a contradiction in terms? Environ. Conserv. 25, 131{145. Koziell, I. 2001 Diversity not adversity: sustaining livelihoods with biodiversity. London: International Institute for Environment and Development. Reid, W. V., Laird, S. A., Meyer, C. A., Gamez, R., Sittenfeld, A., Janzen, D. H., Collin, M. A. & Juma, C. 1993 Biodiversity prospecting: using genetic resources for sustainable development. Washington, DC: World Resources Institute. Ten Kate, K. 1995 Biopiracy or green petroleum? Expectations and best practice in bioprospecting. London: Overseas Development Administration. Phil. Trans. R. Soc. Lond. A (2002)

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Trexler, M., Koslo® , L. & Gibbons, R. 1999 Overview of forestry ad land-use projects pursued under the pilot. In The UN Framework Convention on Climate Change Activities Implemented Jointly (AIJ) pilot: experiences and lessons learned (ed. R. K. Dixon). Dordrecht: Kluwer. Vermeulen, S. & Koziell, I. 2002 Integrating local and global biodiversity values: a review of biodiversity assessment. London: International Institute for Environment and Development. (In the press.) WRI 1998 Climate, biodiversity and forests. Washington, DC: World Resources Institute.

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