E-cigarettes - Government policy to combat demerit good or government failure example?

It struck me has I was reading this BBC report on the various UK government approaches to e-cigarettes, that the rise of the e-cig offers students a useful example on various fronts when preparing for lessons on market and government failure.

We've used good old-fashioned cigarettes as a staple example of a demerit good for.... well as long as the word demerit has been around as far as I can see! Perhaps it was the first noted demerit good? We economists love the fact that it allows us to bring in inelastic demand as well. What about e-cigarettes?