A negative externality is a cost imposed on a 'third party' as a result of the activities or buyers or sellers.
Most transactions in market economies create externalities - some of which are beneficial - yet not paid for by the beneficiaries - and some have a detrimental effect on others, although they are not compensated by those causing the negative effect.
An example of an external cost of consumption is the amount of waste plastic discarded after use. An external cost of production might include the chemical pollution resulting from the processes of production and of distribution.
Factories use energy which may be derived from fossil fuels. Other types of production directly result in pollutants, including chemical waste as a by-product of clothe production.
Graphically, external costs shift the marginal social cost curve to shift to the left. Socially-efficient production and consumption occur at the output where marginal social cost equals marginal social benefit, at Qs. Net welfare loss is area A, B, C.