Smog is an example of that. There are several ways to reduce smog in a free market.
This first step is to stop subsizing roads. Also, peer pressure can encourage people to get their vehicles smogged. Likewise, local residents could sue road owners for allowing excessive pollution. People could choose to purchase vehicles that do not pollute as much.
The important thing is that environmental standards should be set by the concerted efforts of the many, and not by the demands of a few.