Optimal recycling model selection in a closed-loop supply chain for electric vehicle batteries under carbon cap-trade and reward-penalty policies using the Stackelberg game

Abstract

In recent years, a large number of electric vehicle (EV) batteries have retired owing to the significant growth of EVs. Developing an efficient closed-loop recycling system and effective management of retired EV batteries have become crucial. Motivated by this challenge, a closed-loop supply chain for the EV battery is formulated with four mixed-channel recycling models under the carbon cap-trade and reward-penalty mechanism. In the forward supply chain, the retailer purchases EV batteries from the manufacturer and then sells the batteries to the customers. In the reverse supply chain, the collection of retired EV batteries is carried out by either the retailer, third-party recycler, echelon firm, or a combination of these members. These collected EV batteries are classified into echelon utilizable or non-echelon utilizable batteries. The echelon-utilizable batteries are modified into echelon products, while the non-echelon batteries are recycled for extraction of raw materials to manufacture new EV batteries. The findings are derived by using actual market data and Stackelberg game theory. The influence of carbon trading prices, reward penalty intensity, costs associated with the firms, and competition coefficients are studied to provide a detailed and comprehensive analysis. A comparison of optimal profits pertaining to different models is also conducted. The results indicate that (i) different models of recycling EV batteries do not influence the optimal decisions in the forward supply chain; (ii) it is beneficial for the members to participate in the reverse chain; (iii) manufacturer’s profit increases when the carbon quota rises and decreases when the price of carbon trading increases; (iv) the involvement of echelon firms in the recycling sector has a positive effect on reducing the recycling load and increasing the profitability of the manufacturer. Managerial insights and concluding remarks are provided to guide manufacturers and recyclers in selecting the most suitable recycling model based on their specific requirements.