Reimagining government subsidy policies: facilitating echelon utilization and sustainable practices for retired battery systems

The rising number of retired electric vehicle batteries has sparked significant global interest in the recycling and reuse sectors, crucial for achieving a Sustainable Circular Economy and Net-Zero goals. In response, governments are exploring strategic initiatives to enhance the echelon utilization of these batteries, yet current subsidy policies require refinement. This study presents a two-period closed-loop supply chain model involving a battery manufacturer, recycler, power grid company, and government to investigate how subsidies for purchasing reuseable batteries can bolster their utilization for energy storage. The paper analyzes the optimal subsidy amount and assesses stakeholder decisions, profits, and social welfare under scenarios with and without subsidies. The findings reveal that while effective subsidy policies can enhance overall social welfare and support a circular economy, their impact on echelon utilization is influenced by the factors such as battery quality, operating revenue, carbon emission and installation costs. Furthermore, varying installation costs between second life and new batteries do not necessarily hinder purchase decisions by power companies. This research enriches the discourse on sustainable industrial systems by providing actionable insights for businesses to develop effective strategies in retired battery utilization and guiding policymakers in promoting circular economy initiatives that contribute to industry sustainability and Net-Zero objectives.