Negative externalities are seen whe

Negative externalities are seen when an individual or firm makes a decision and doesn't have to pay the full cost of the decision. If a good has a negative externality, the cost to society is greater than the cost the consumer is paying for it. This results in inefficiencies and welfare loss, and the welfare can be gained by reducing the quantity produced. A tax is one way to reduce the quantity produced to the socially optimal level