This previous post tells the story of how government can deal with externalities (which, by the way, is a very important concept for you to know, so click the link!) through regulations. Now, economists usually prefer a different means to deal with externalities, i.e., taxation. Specifically, it is usually called a “Pigovian tax“.
In fact, Greg Mankiw, economics professor at Harvard, went so far as to “start” the Pigou Club. An excerpt from his “manifesto” published in the Wall Street Journal:
With the midterm election around the corner, here’s a wacky idea you won’t often hear from our elected leaders: We should raise the tax on gasoline. Not quickly, but substantially. I would like to see Congress increase the gas tax by $1 per gallon, phased in gradually by 10 cents per year over the next decade. Campaign consultants aren’t fond of this kind of proposal, but policy wonks keep pushing for it. Here’s why…
You can read the rest here. Once you know what externalities are, you’ll see how this (standard economics) idea makes good sense.