["Business Strategy and the Environment, EarlyView. ", "\nABSTRACT\nThe transition to circular construction suffers from uncertainties related to costs, market realities, supply, regulations and expertise using secondary materials in building projects. Uncertainties are large, and resolving them needs policy interventions. This study examines a local policy innovation that successfully prompted construction companies to develop business cases for circular construction. At the heart of policy innovation was a novel use of a plot handover procedure. A city used the procedure in the form of a competition where construction companies competed for a valuable plot by drafting a concept for circular residential building. Our data consisted of interviews, documents and observations. We used uncertainty management from market formation studies as our main analytical tool. This research provides empirical evidence of how policy can facilitate the circular construction transition and provides methodological and theoretical contributions to market formation studies by showing in detail how public interventions can support the development of sustainable markets.\n"]