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Sustainable life cycle management of batteries in a closed-loop supply chain under hierarchical cost-sharing contracts and carbon policies

Author

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  • Khodoomi, Mohammad Reza
  • Tosarkani, Babak Mohamadpour
  • Li, Eric Ping Hung

Abstract

Concerns about the environment have led to an increase in the number of electric vehicles, which has heightened the dependency on batteries. However, this dependence has also brought about issues such as environmental pollution and resource depletion. Therefore, addressing the battery life cycle and recycling is crucial. As electric vehicle battery capabilities gradually decrease over time, they can be repurposed for second-life usage in applications, such as energy-sharing systems, or recycled when their capacity is low. In line with sustainability goals, carbon emissions from battery production, remanufacturing, and recycling must also be considered. This research examines strategic decisions related to pricing, battery quality, and carbon emissions in a closed-loop supply chain (CLSC) for batteries. Notably, a holistic supply chain perspective is adopted to optimize both sustainability and economic performance across manufacturers, remanufacturers, and retailers within the CLSC. The study compares different scenarios, including carbon tax policies and carbon trading markets, while focusing on optimizing three dimensions of sustainability, namely economic, social, and environmental aspects. Since battery manufacturers are responsible for the life cycle of their products, this study introduces a hierarchical cost-sharing contract to establish a holding company for life cycle management and to improve coordination among supply chain entities. Thus, the models are analyzed in centralized, Stackelberg game decision-making structures, and a newly introduced contract is developed to improve coordination among supply chain members. Moreover, this study introduces a novel integration of a game theory model with a data-driven framework to address uncertainties in input parameters. The results indicate that the carbon trading market can be more profitable for supply chain members than the carbon tax policy, with the new contract further enhancing profitability.

Suggested Citation

  • Khodoomi, Mohammad Reza & Tosarkani, Babak Mohamadpour & Li, Eric Ping Hung, 2025. "Sustainable life cycle management of batteries in a closed-loop supply chain under hierarchical cost-sharing contracts and carbon policies," International Journal of Production Economics, Elsevier, vol. 290(C).
    • Handle: RePEc:eee:proeco:v:290:y:2025:i:c:s0925527325002841
    DOI: 10.1016/j.ijpe.2025.109799
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