Market Failure and Government Intervention - The row over London’s ultra-low emission zone

London's Ultra Low Emissions Zone (ULEZ) is in the spotlight again, with the undoubted benefits of cleaner air, and a reduction in the negative externalities associated with air pollution being set against the distributional issues involved.

It is undeniable that air quality in the capital has increased, and the fact that only 6% of vehicles pay the charge implies that it affects a small proportion of all vehicle drivers. However, when the extension of the zone to outer London is set against a cost of living crisis, the optics of the policy don't look great, even allowing for a compensatory scrappage scheme.

Please read: Battle for clean air: the row raging over London’s ultra-low emission zone

What is the Ultra Low Emissions Zone?

The Ultra Low Emissions Zone (ULEZ) in London is an initiative designed to reduce air pollution in the city by encouraging the use of cleaner, low-emission vehicles. It was introduced in April 2019 and covers an area in central London that is bounded by the North and South Circular Roads.

Under the ULEZ scheme, vehicles that do not meet certain emissions standards are required to pay a daily charge to enter the zone. The emissions standards are based on the Euro emissions standards, which set limits on the amount of pollutants that can be emitted by vehicles.

In general, petrol vehicles that do not meet the Euro 4 emissions standard and diesel vehicles that do not meet the Euro 6 emissions standard are subject to the ULEZ charge. However, there are some exemptions, such as for disabled vehicles and some types of commercial vehicles.

The ULEZ charge is in addition to the existing Congestion Charge, which applies to vehicles driving in the same central London zone during certain hours. The ULEZ charge is £12.50 per day for most vehicles, but it can be higher for larger vehicles like buses and lorries.

The ULEZ is part of a wider effort by the London government to improve air quality in the city and reduce harmful emissions from vehicles. It is hoped that the scheme will encourage drivers to switch to cleaner, low-emission vehicles and ultimately improve public health by reducing air pollution levels in the city.