How do taxes intended to reduce negative externalities impact government revenue and social welfare?

Taxes aimed at reducing negative externalities, like pollution, are designed to make businesses and individuals pay for the social costs they create. When the government imposes these taxes, it can generate revenue that can be used for public goods, such as healthcare or education. For example, if a factory is taxed for its carbon emissions, it might invest in cleaner technology to lower its tax burden, leading to a healthier environment. This not only helps improve social welfare by reducing pollution but also can encourage businesses to innovate. Overall, while these taxes can strain some businesses, they can also enhance community well-being and contribute to government funds for societal improvements.