Used engine oil that is drained out after every oil change in a vehicle is a hazardous waste, but non-adherence to pollution norms at service stations for its disposal has aggravated air and water pollution in India. In most roadside service stations in the informal sector, used oil is dumped onto drains, which find their way into rivers and water bodies in cities like Guwahati without effluent treatment plants and pollute fresh water sources. A large number of service stations illegally sell used oil to industries for use as furnace oil without reprocessing or refining, which adds to air pollution. The draft notification issued by the Ministry of Environment and Climate Change proposing regulations for extended producer responsibility (EPR) for used oil offers a solution to the problem that is based on the circular economy concept. The draft notification highlights that one litre of used oil can contaminate one million litres of fresh water—a year’s supply for 50 people—as it contains toxic substances such as benzene, lead, zinc, and cadmium, in addition to impurities such as dirt, metal parts, and water. With the country’s road network being the third largest and ever expanding, 323 million registered vehicles tell the story of the spectacular growth of the automobile industry. The growth story also indicates the potential hazards from the increasing volume of used oil and lubrication oil in the country, if sources generating it continue to violate pollution norms while disposing of it. The notification proposes to make it mandatory for producers, collection agents, importers of used oil, and recyclers to register on the portal of the Central Pollution Control Board (CPCB). It also proposes a gradual increase in EPR targets for these stakeholders, starting with 10% in 2024–25 and increasing it by 10% annually to achieve 50% of base oil or lubrication oil sold or imported by 2028–2029. For managing the used oil, the EPR regulation covers producing re-refined base oil or lubrication oil and energy recovery. Re-refining is defined as any process of removing undesirable impurities from used oil and making the end product base oil or lubrication oil. The notification explains that the re-refining of used lubricants could result in both environmental and economic benefits. Re-refining used oil to manufacture base oil conserves more energy than reprocessing the used oil for use as fuel. The energy required to manufacture re-refined base oil from used oil is only one-third of the energy required to refine crude oil to produce virgin base oil, which adds to and elaborates on the advantages of the circular economy approach to the disposal of used oil. The Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 (HOWM Rule, 2016) under the Environment (Protection) Act, 1986, provide the legal framework to ensure safe handling, generation, processing, treatment, packaging, storage, transportation, collection, and disposal of hazardous and other waste. The National Inventory on Generation and Management of Hazardous and Other Wastes (2021–22) published by the CPCB in February 2023 highlights that there are 78,437 hazardous generating units, out of which 71,961 units possess authorization and 15,970 units are exempt from obtaining authorization, but only 53,487 units (i.e., 68%) submitted an annual return about hazardous waste generation, storage, recycling, utilisation, disposal, etc., for the year 2021–22. Inventory data brings to the fore that at present there are 2297 recyclers with an authorised capacity of 9.42 million MT in the country, with Maharashtra leading the chart with 411 recyclers, followed by Gujarat with 327 units and Uttar Pradesh with 232 units. However, in 2021–22, only 17% of the authorised capacity, i.e., 1.63 million MT of hazardous waste, will have been recycled. These figures highlight the challenges of compliance with EPR or other regulatory norms aimed at reducing carbon footprints and addressing pollution problems through a circular economy approach, such as the one proposed in the draft notification. Failure to enforce the single-use plastic prohibition effectively by the CPCB or the state Pollution Control Board speaks volumes about oversight challenges with limited manpower. Achieving the objectives of a SUP ban or recycling of e-waste or hazardous wastes is critical to making the circular economy approach based on the 3R principle—reduce, reuse, and recycle—the pivot of climate change mitigation by reducing environmental pollution and carbon footprint. Without strengthening the CPCB or SPCB with more trained personnel, overburdening the regulatory bodies with more monitoring and inspection tasks in addition to their routine inspections for the enforcement of pollution norms is not going to ensure the intended benefits of the draft notification. Building awareness among the stakeholders about the problems and solutions available needs prioritisation. Rising environmental pollution aggravating climate change impacts, challenges of addressing them notwithstanding, is a harsh reality, and the only way to address it is strict enforcement of pollution control norms. Addressing systemic problems and structural challenges is the key to overcoming the challenges of circular economy solutions to environmental pollution.