Pigouvian tax – definition
A Pigouvian tax is a tax on the generator of negative externalities, and is named after the Cambridge Economist Arthur Cecil Pigou (1877–1959). A Pigouvian tax is often referred to as a ‘sin tax’.
Pigou argued that a unit tax on harmful products, such as cigarettes, would be an effective may of establishing an efficient equilibrium price, which took into account the negative effects on consumption.
Read more on negative externalities