Is Natural Capital Really Substitutable?

Posted: 23 Oct 2019

See all articles by Francois Cohen

Francois Cohen

University of Oxford

Cameron J. Hepburn

University of Oxford

Alexander Teytelboym

University of Oxford

Date Written: October 2019

Abstract

The extent to which natural capital can be substituted with manufactured or human capital in production is a key determinant of the possibility of long-run sustainable economic development. We review empirical literature pertaining to the degree of substitutability between natural capital and other forms of capital. We find that most available substitutability estimates do not stand up to careful scrutiny. Moreover, accurate substitutability estimates are even more difficult to produce for unpriced or mispriced resources. Finally, we provide evidence from industrial energy use, and agricultural land use, that suggests substitutability of natural capital with other forms of capital may be low to moderate.

Suggested Citation

Cohen, Francois and Hepburn, Cameron J. and Teytelboym, Alexander, Is Natural Capital Really Substitutable? (October 2019). Annual Review of Environment and Resources, Vol. 44, pp. 425-448, 2019, Available at SSRN: https://ssrn.com/abstract=3472222 or http://dx.doi.org/10.1146/annurev-environ-101718-033055

Francois Cohen (Contact Author)

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Cameron J. Hepburn

University of Oxford

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Alexander Teytelboym

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

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