Natural versus manufactured capital: win-lose or win-win? A case study of the Finnish pulp and paper industry

The effect of investments on environmental Variables has been discussed thr ough the win-win rhetoric, specifically in micro-level analysis. On the mac ro-level the win-win rhetoric has been replaced by the arguments for and ag ainst the substitutability of natural and manufactured capital. Here these two concepts belonging to different levels of analysis are linked by lookin g at the environmental and economic effects of chosen investment strategies in a traditionally capital-intensive industry over time. The paper shows t hat, rather than generalise the existence of win-win situations or the subs titutability of capital, these positions are determined by purely situation al factors. As a result, in the assessment of substitutability, the specifi c operating context of the industry needs to be taken into account. This im plies also that environmental policy needs to be designed to be adaptive an d responsive to those situational factors to create beneficial outcomes for the economy and for the environment. (C) 2001 Elsevier Science B.V. All ri ghts reserved.