You pay for those benefits. Those payments go to the people using fossil fuels. It's not an externality. Your thought experiment about banning fossil fuels doe

You pay for those benefits. Those payments go to the people using fossil fuels. It's not an externality. Your thought experiment about banning fossil fuels doesn't tell us anything about externalities. An externality is when part of the cost or benefit of a thing is borne by someone with no control over it. This is bad because it means that the market will produce an amount of usage that isn't optimal. If the net externalities are negative, the market will use too much. If they're positive, the market will not use enough. The fact that a blanket ban would leave you worse off only tells us that the optimal amount of fossil fuel usage isn't zero and that the current amount of usage is better. It doesn't tell us whether current usage is optimal or, if non-optimal, whether it's too high or too low. For an example of something with positive externalities, consider public roads. Consider the road between me and the local grocery store. This road benefits me and the store. If I were responsible for building and maintaining it, I'd probably make it a minimal one-lane dirt track, because that would suffice for me, and the added expense of more lanes and more durable surface wouldn't pay off for me. But thousands of other people benefit from this road as well, and the total benefit to everyone makes it well worth building a wider, paved road. Left purely to the market, that road would be a narrow dirt track. Thankfully, the government steps in and builds a proper road, then captures the positive externality through taxes. Another way to handle it would be to make it a private road and charge everyone for access. Transaction costs make this impractical, but if we could handwave those away and have efficient micro-transactions for road usage, that would get rid of the positive externality and give us efficient road use and construction without government intervention. There's nothing like this for fossil fuels. People pay for the stuff based on how much they use. Other people pay those people based on the benefit they bring. The benefits are already captured. Subsidizing fossil fuels would increase the amount that gets used, which would be farther from the optimal usage than where we are currently. We currently use fossil fuels at a level above the optimal, because individuals deciding how much fuel to use aren't bearing the full costs of using it. There's no indication that anything like that is at play with fossil fuels.