Is Natural Capital Really Substitutable?

Cameron Hepburn, Alexander Teytelboym and Francois Cohen

INET Oxford Working Papers from Institute for New Economic Thinking at the Oxford Martin School, University of Oxford

Abstract: The extent to which natural capital can be substituted with physical or human capital in production is a key determinant of the possibility of long-run sustainable economic development. We review the empirical literature that assesses 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 econometric scrutiny. Moreover, accurate substitutability estimates are even more difficult to produce for unpriced or mispriced resources, despite the availability of recently developed econometric methods. 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.

Keywords: substitutability; natural capital; energy; agriculture; climate change (search for similar items in EconPapers)
JEL-codes: O44 Q10 Q40 Q50 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2018-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:amz:wpaper:2018-12

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