The common definitions of "free markets" typically mean a lack of regulation of what can be sold and the a lack of regulation of the prices that things are sold at. The desired outcome (supposedly) is that the price is determined by the participants, based on their knowledge of the full cost of ownership and the perception of the benefits of ownership.

But externalities have no inherent or obvious cost to market participants, either because they are so distributed that the cost per participant is ignorably small, or because the costs are distributed in time (and thus do not affect current market participants) (or both).

The cost of externalities has to be determined and that inevitably involves questions about values. As a trivial example: how much do you (or should you) value clean air? What ppm contamination is worth a dollar to you every time you purchase fuel?

This means that a "free market" with prices that include the cost of externalities must inevitably be regulated in some important sense, since the cost of externalities can only be established via the same processes used for regulation in general. And by most definitions of "free market", that is no longer a "free market".

That doesn't mean this isn't the right thing to do. It just needs better terminology to describe it.