December 14th

Here’s a real kick in the butt: the simulation acts such that, if you increase taxes on carbon dioxide to discourage emissions, you end up with greater carbon releases over the course of the game.


Here’s how the simulation produces this strange result: in the BAU scenario (“Business As Usual” – no intervention by the player), use of coal skyrockets, releasing large amounts of CO2 into the atmosphere, which causes rapid climate change, which in turn does so much damage to the global economy that it goes into a long depression, causing demand for energy to fall. As a consequence, over the long run, less energy is generated in the BAU scenario; indeed, less of everything is produced, which in turn makes people very unhappy.

But if you tax CO2 emissions, that inhibits use of fossil fuels, especially coal, which forces the economy to shift over to solar and wind power, a transition that is initially bad for the economy (because these sources of energy are more expensive than coal), but in the long run, the overall damage to the economy from climate change is lessened, so that the economy continues to grow. By the end of the game, the economy is much bigger than in the BAU scenario, and the induced sources of CO2 (permafrost and forest fires), have pushed up CO2 emissions so that the cumulative effect is for greater total CO2 emissions!

Here are the graphs of the variables to show the process. First comes the graph of energy usage. I have placed the two graphs together, so it’s a little confusing:

The graph that pokes out above the confusion is the environmentalist scenario, in which CO2 and gasoline are moderately taxed. The BAU scenario is squashed down to be on the same scale as the environmentalist graph. You can see, for example, that the use of (dark gray) in the BAU scenario continues right until the end of the game, whereas coal usage goes to zero around 2060 in the environmentalist scenario. Oil and natural gas have similar profiles. Now let’s look at the effect of this on global GDP:

Here we see the net result: global GDP is greatly suppressed in the BAU scenario. But why? One would expect that industry, free from taxes, would be more productive, increasing GDP, right? So why doesn’t GDP increase?

total CO2 emissions:

Once again, the environmentalist scenario is the graph poking above the mess.

After much analysis, I figured out the source of the problem. The taxes imposed in the environmentalist scenario generated billions of dollars of revenues, some of which were used to subsidize educational efforts all over the world. This raised educational levels all over the world, including the number of doctorates. That produced higher levels of research and development, which boosted the development of High Technology, which boosted the economy. The stronger economy created greater demand for energy, leading to the results presented above.

The core problem is my handling of Educational Level and High Technology. My first mistake is in the algorithm for Educational Level: I set it to 6.2 years plus the amount of subsidy the player provides. This is wrong; it should include a term for Global GDP, expressing the idea that a fixed percentage of Global GDP is devoted to education. Thus, as the GDP rises, we should see educational levels rising, establishing a virtuous circle.

My second mistake lies in the algorithm for High Technology, which makes it linearly proportional to the increase in Educational Level (except that it can never fall even if Educational Level falls). Once again, I should have a term proportional to GDP. High Technology should always increase, even with low values of Educational Level and Global GDP.

These changes will dramatically alter the simulation; I’m in for another round of major rebalancing. Oh, my aching head!