I agree...but the argument is going to break down over quantifying externalities. In essence the democrats aren't really interested in maximizing "conventinal utility", they don't want fossil fuels to be cheaper. They don't want energy to be cheaper. They want energy to be much more expensive, so that "ethical" alternatives...or what you call fairy dust can become competitive. If you pick up an energy economics text book the positive science of economics is mostly put to the normative agenda of bringing us towards the "moral high ground" of "fairy dust". Of course as you point out ethanol has incredible externalities and windmill farms kill birds. What is worse the cure or the disease? Is the cure the disease?