Since you can’t destroy or create matter or energy, what happens during a paradox or new timeline event? 

The energy “created” by the event and the affected people have to go somewhere. In less extreme cases, such as new memories, the affected people have their memories altered to fit the new timeline. In more extreme cases, such as a person being erased from existence, they can’t go into the Afterlife because they technically didn’t exist. Instead, they are reborn. In most cases, they become animals, toys, or other objects in need of a soul.

More recently, they are reborn in the cyber-realm as viruses, programs, ghosts in the machine, and video game characters or assets. These Paradox Prisoners remain in this state until their death at which point they are officially dead and can enter the Afterlife to await Final Judgement.