I see what you say, however, since the proposal as I have read it says "And this will keep happening as long as hashrate keeps rising," - what actually happens in the case hashrate stagnates or falls?

In general, a target hashrate can be set by users (can be less or more
than the peak hashrate). As long as hashrate is rising and still
didn't reach the target, miners will incrementally get the reserve
fees. Once the "contract" times out, the remaining part can be used as
fees by the users who created the reserve fee "contract". So if
hashrate remains the same or falls, then users get the reserve fees
back.

I agree that we can't stop people from being greedy. If they are not
Bitcoin mining, they will try to put their energy to earn in some
other way...The hashrate is related the demand for Bitcoin (price) and
the amount of fees/subsidies the miners will get paid. For every level
of mining rewards (based on demand) there exists a limit on the
hashrate. Once hashrate gets large enough, no new miners (additional
hashrate) will want to join since their share of the hashrate is too
small to make a profit.

Also with merge mining and proof of space we can be quite efficient in
the future. But of course I sympathize with the "don't be greedy"
philosophy, and it can be good to educate people to use less resources
than they need, just I think it's a bit outside of the scope of what
the Bitcoin software protocol does.