The rapid increase in ownership of new energy vehicles has resulted in a surge in retired power batteries, necessitating the development of an efficient recycling system. Given the application of blockchain in recycling, we analyze the blockchain adoption and echelon utilization decisions for the manufacturer in a closed-loop supply chain under the carbon trading policy and offer four distinct models: 1) without echelon utilization and without blockchain, 2) without echelon utilization but with blockchain, 3) echelon utilization without blockchain, and 4) echelon utilization with blockchain. Equilibrium decisions and profits are derived across these models. The results show: adopting blockchain technology is consistently the optimal choice for the manufacturer irrespective of echelon utilization business, and can enhance the recycling quantity. The manufacturer’s decision regarding echelon utilization depends on the recycling competition coefficient between the manufacturer and the echelon utilizer. If the competition coefficient falls below a threshold, the manufacturer engages in echelon utilization business; Otherwise, the manufacturer refrains from engaging in echelon utilization activities. The carbon emission reduction level is independent of the manufacturer’s involvement in echelon utilization but is improved by the adoption of blockchain. Additionally, conducting Nash negotiation on profit allocation is beneficial for both members.