Taxing externalities is, of course, a good idea, and key to any functioning system of property rights. I don't believe they should be used for revenues, becaus

Taxing externalities is, of course, a good idea, and key to any functioning system of property rights. I don't believe they should be used for revenues, because once you do that, it misplaces the incentive: now the government makes more revenue per unit externality. So I favor a flat rebate for all externality taxes.