Vaniver comments on How should negative externalities be handled? (Warning: politics) - Less Wrong Discussion
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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.