How can taxes reduce the effect of negative externalities?

Firstly, we know a negative externality is when the marginal social cost of a good or service is greater than the marginal private cost: in practice, this means that there are third parties (people who are not the buyer or the seller) who must bear a cost as a result of any given transaction. A tax on a product which produces negative externalities can artificially increase the cost of the good or service so that it is in line with the social cost, thus causing lower consumption and reducing the size of the externality.An example of this is in the market for cigarettes, where the cost is not just the price of the packet of cigarettes to the buyer, but there are also third-party costs - such as the strain smokers put on the NHS, or the lower quality of air that people around a smoker experience. Consequently, the MSC curve (marginal social cost) is higher than the MPC curve (marginal private cost). A tax on cigarettes would effectively increase the private cost of cigarettes, and thus shift the curve upwards - here, the quantity consumed would reduce to a point more in line with the social cost, reducing the externality.