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 through the win–win rhetoric, specifically in micro-level analysis. On the macro-level the win–win rhetoric has been replaced by the arguments for and against the substitutability of natural and manufactured capital. Here these two concepts belonging to different levels of analysis are linked by looking at the environmental and economic effects of chosen investment strategies in a traditionally capital-intensive industry over time. The paper shows that, rather than generalise the existence of win–win situations or the substitutability of capital, these positions are determined by purely situational factors. As a result, in the assessment of substitutability, the specific operating context of the industry needs to be taken into account. This implies also that environmental policy needs to be designed to be adaptive and responsive to those situational factors to create beneficial outcomes for the economy and for the environment.