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Luke_A_Somers comments on How should negative externalities be handled? (Warning: politics) - Less Wrong Discussion
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This is primarily when the efficiency improvements make a previously niche technology viable over a much broader range of cases. Already-dominant technologies don't suffer from this to nearly the extent. Cases where the efficiency is not the limiting factor on usage do not suffer this effect at all.
Like, if cars took a tenth the gas they do now, people wouldn't drive ten times as much. They'd drive some more, and buy more SUVs and winnebagos, but unless a colossal number of people are held back from using a winnebago by gas prices, that would only partially compensate for the efficiency increase, because people are already doing close to as much driving as they care to. Back in the 1970's this was not the case at all.
This isn't just the Jevons paradox, though that does amplify this. It's also the claim that while a tax and subsidy are equivalent in the short-run, in the long-run the tax decreases the profitability of the polluting industry while a subsidy increases the profitability of the polluting industry, which may lead to increased pollution.
The subsidy itself will also make the technology viable over a broader range of cases, yes... should have mentioned that part. Tried to get too clever.