ULEZ (Ultra Low Emission Zone) is an area where drivers have to pay an extra fee to discourage driving and reduce the negative externalities caused by driving.
Because driving causes air pollution and smog, an increase of cars can cause health issues like heart disease and lung cancer. Because of this, this puts a burden on the NHS as they have to treat more patients with preventable diseases. As a result, this wastes money which could’ve been better used elsewhere, like welfare benefits for the poor or unemployed.
By charging a fee on drivers who pollute, this discourages them to drive at all. So, less cars are in big cities like London or Sheffield. Due to this, the air in these cities is cleaner, which reduces the risk of preventable diseases.
The increased number of polluting cars have caused market failure, where third parties have to pay an extra cost, like an increase of taxes to pay the NHS. Government Intervention also occurs here, because the government has to intervene via ULEZ to stop these negative externalities.