Also, the question isn't whether direct subsidies are more efficient than taxing externalities. The question is whether direct subsidies are more efficient than doing nothing (which is the only politically feasible alternative).
I mean, it would be, only in the sense that "criminal justice system picks losers, by arresting people who commit crimes".
2) Direct government subsidies for favored corporations is likely less economically efficient than doing nothing in cases. Subsidy decisions are not guided at all by the info encoded in the price system, and are instead likely to be based on rent-seeking by favored interests groups. See <http://en.wikipedia.org/wiki/Economic_calculation_problem...;
Your original comment cited "basic economics" and implied that the government would be better than the market at "picking winners and losers" in the face of negative externalities. But that is not a consensus view among economists.
In cases, yes. Given the sheer magnitude of thee externalities in environmental situations, not likely. We're talking trillions of dollars of implicit subsidies here.
"Politician's logic: We must do something. This is something. Therefore we must do it."
Direct government subsidies create deadweight loss, and by hurting the competitive position of companies and technologies that don't get the subsidy, they can actually make the negative externality worse. You can't justify a bad intervention just by pointing to the magnitude of the externality.