Environmental Regulation at the Crossroads: A Review of Catalysts and Barriers in Circular Economy Transitions

ABSTRACT Amid growing resource pressures, environmental regulation plays a critical role in enabling the transition to a circular economy (CE). This study conducts a systematic literature review to synthesize how different regulatory approaches—command‐and‐control, market‐based, voluntary, and reflexive—affect CE transitions across economic and institutional contexts. The findings highlight the dual role of regulation: as a driver of innovation, efficiency, and public participation, but also as a barrier when it is rigid, fragmented, or weakly enforced. The review further examines the conditional relationship between regulation and economic growth, emphasizing that outcomes depend on sectoral dynamics, technological maturity, and governance effectiveness. By advancing an integrative “regulatory continuum” perspective, the study clarifies underlying mechanisms, identifies cross‐national and sectoral heterogeneity, and outlines implications for policy design and enforcement. Although limited by its reliance on secondary literature, the review underscores the need for empirical and comparative research to refine regulations that align environmental protection with sustainable economic transformation.