Efficient allocation = the amount of resources allocated to an endeavor should reflect how strongly society cares about it
Diminishing returns = the point at which the benefit of something starts to decline
For example, I like a lot of cilantro in my menudo. So adding more cilantro increases my benefit. However, there's a point where adding more and more cilantro provides me with less and less benefit.
Society is essentially a bunch of different ingredients. Combating climate change is one ingredient. We could continue spending more and more money on combating climate change. But at a certain point we'd start to get less and less bang for our buck.
The efficient allocation of cilantro and combating climate change is the allocation right before returns start to diminish.
Therefore, to argue that "diminishing returns" is an exception to the rule of efficient allocation is... well... funny.