The report ‘Literature Review on the Role of Policy Instruments to Support the Circular Economy Transition’ presents a comprehensive synthesis of academic and policy research examining how different instruments can accelerate the shift to a circular economy (CE). Commissioned by the European Commission, the review explores regulatory, economic, and voluntary mechanisms that influence production, consumption, and waste management patterns in line with EU sustainability objectives.

Key Insights

• Regulatory instruments: Traditional command-and-control measures, such as extended producer responsibility (EPR), eco-design standards, and product bans remain essential in setting baseline environmental performance. These policies help close material loops and encourage resource efficiency across industries.
• Economic and market-based instruments: Taxes, subsidies, and green public procurement (GPP) are identified as effective tools to influence market behaviour. The report finds that well-designed incentives, such as reduced VAT for repair services or deposit-refund schemes, can promote circular business models and stimulate innovation.
• Voluntary agreements and information-based tools: Non-regulatory instruments like eco-labels, awareness campaigns, and corporate reporting frameworks can complement binding measures by fostering consumer engagement and transparency. The success of these initiatives often depends on stakeholder participation and institutional coordination.
• Integration and coherence: The review underscores the importance of combining different policy instruments to create coherent, mutually reinforcing frameworks. Integrated approaches linking product policy, waste management, and industrial innovation, are shown to be more effective than isolated measures.
• Knowledge gaps: Despite growing literature, the report highlights the need for more empirical studies quantifying the effectiveness of specific policy mixes and assessing their socio-economic impacts.

This literature review provides valuable guidance for policymakers seeking to design effective CE strategies. By aligning regulatory, economic, and voluntary instruments, governments can drive systemic change towards sustainable production and consumption.

For further details, refer to the full report ‘Literature Review on the Role of Policy Instruments to Support the Circular Economy Transition’ available through the European Commission Publications Office.