How Tax–Subsidy Policies Shape Battery Recycling Strategies Under the Extended Producer Responsibility System

To address the increasing volume of end-of-life power batteries, governments leverage Extended Producer Responsibility (EPR) regulations to encourage battery suppliers to increase recycling. We develop a Stackelberg game model for a closed-loop supply chain (CLSC) that includes a government, a battery supplier, an NEV manufacturer, and a third-party recycler. The model endogenizes tax–subsidy decisions while incorporating cascade utilization, competitive intensity, and environmental damage from informal channels. We compare three recycling modes: manufacturer–supplier competition (MSC), manufacturer–third-party competition (MTC), and manufacturer–third-party alliance (MTA). Our analysis addresses three main issues. First, the structure of recycling modes affects the equilibrium decisions of CLSC members: pricing under MSC is governed by a threshold effect of cascade utilization, whereas pricing under MTC depends on relative cost differences. Second, higher cascade utilization strengthens the supplier’s pricing power under MSC, whereas intensified competition reduces the profits of the supplier and government under MSC and MTC; by contrast, the profits of the supplier and government under MTA remain stable. Third, environmental damage encourages the government to raise the subsidy level provided to suppliers for battery recycling. These findings offer practical guidance for designing adaptive EPR policies that balance economic and environmental objectives.