The current situation is that many students don't perceive that using AI to produce, for example, essays is harmful to themselves, and students who do things honestly may feel pressure to use AI in order to stay competitive with students who do.

The answer may be to focus less on output and more on the process. e.g. Instead of sending students off to do essays at home and then merely grading what gets handed in, perhaps teachers should run workshops where students work on their essays while receiving guidance. i.e. Everybody works in the classroom on their essay and talks to each other and the teacher about what they're doing. Grades would be at least partly based on participation, and teachers would get a better sense of what students are actually able to write themselves. If Johnny sits back and picks his nose in the workshop and then hands in a paper that's suspiciously good, it's probably slop even if it isn't obviously so.

Of course, doing this sort of thing would mean taking time away from lectures and wrote learning. Finding the right balance is no easy task and it's going to take good teachers to blaze the way. That can only happen if they're backed with resources and the freedom to alter curriculum.