Carbon emission abatement is very important for manufacturers regulated by environmental policies. However, choosing an optimal carbon abatement strategy is difficult for many firms. This paper attempts to explore the appropriate carbon abatement strategy for firms that are regulated by cap-and-trade. Specifically, by bringing remanufacturing into consideration, this paper examines a manufacturer that has four alternative carbon abatement strategies: (1) do nothing, (2) invest in carbon abatement, (3) engage in remanufacturing, or (4) become involved in investment and remanufacturing together. The models of these four strategies are first developed in a monopolistic operating environment. The results show that among the four carbon abatement strategies, although the fourth strategy has the highest costs, it generates the largest profits for the manufacturer, passes the greatest benefits along to consumers, and has the best environmental performance. Next, this study is extended to a competitive environment. The results show that the optimal strategy in the monopolistic environment no longer maximizes profits, and decision guidance is offered for the manufacturer operating under such an environment.

As the global stockpile of end-of-life electric vehicle batteries grows, subsidies have become a primary policy tool to stimulate recycling. However, recyclers can exploit private information about a battery’s State of Health to inflate quality claims and obtain excessive subsidies. This paper develops a Stackelberg game model encompassing a manufacturer and a recycler under three policy scenarios—no subsidy, subsidizing the manufacturer, and subsidizing the recycler—and extends the analysis to a hybrid subsidy scheme that optimally allocates a fixed subsidy budget between the two parties. The results deliver three explicit findings. First, subsidies exhibit a dual effect: while incentivizing recycling, excessively high subsidy levels can instead induce recycler misreporting and fail to improve environmental benefits, particularly for batteries with high reusable value. Second, the expected net value of recycled batteries is a pivotal parameter. When it is high, Pareto improvements for both supply chain members are achieved even with minimal subsidies, regardless of the subsidy recipient. Third, the proposed hybrid subsidy scheme, with an optimally derived allocation ratio, aligns the incentives of the manufacturer and the recycler, mitigates misreporting risk, and coordinates the supply chain more effectively than static, one-size-fits-all policies. The contribution of this study is twofold: it characterizes how subsidy allocation interacts with recycler misreporting in a battery recycling supply chain, and it provides policymakers with actionable guidance for designing differentiated and robust subsidy contracts that advance a sustainable battery ecosystem.