There’s one more important point: if you include externalities in your subsidy calculation you shouldn’t only count negative externalities. Maybe there are none but taxes on fossil fuels usually end up being very regressive taxes on people with older cars who can’t afford to upgrade. Just as one example of a potential positive externality of cheap fossil fuels.
And a negative externality of education might be forcing older workers out of jobs. (Admittedly a stretch, but making this just for the sake of argument.)
The point is once you start including externalities in your subsidy calculations things get super fuzzy fast.
Collecting taxes on these externalities does not say what you use those taxes for. The true cost is the inefficiency from poor resource utilization, hand that money out based on say income and people will buy more efficient cars etc.
Net result lives saved from cleaner air without undo burdens on the poor.
And a negative externality of education might be forcing older workers out of jobs. (Admittedly a stretch, but making this just for the sake of argument.)
The point is once you start including externalities in your subsidy calculations things get super fuzzy fast.