China’s rapid electric vehicle (EV) market expansion—from 331,000 units in 2015 to over 9.5 million in 2023—is generating an unprecedented wave of retired lithium-ion batteries projected to exceed 94 TWh cumulatively by 2060, presenting critical challenges for sustainable resource management. While grid decarbonization can reduce use-phase emissions, the substantial embodied carbon in battery production (55–130 kg CO₂-eq/kWh) remains a critical challenge for achieving carbon neutrality. This study presents an integrated dynamic material flow analysis (MFA) and prospective life cycle assessment (LCA) framework—calibrated against the latest peer-reviewed literature—to quantify the carbon mitigation potential of battery recycling and second-life applications from 2020 to 2060. We evaluate four end-of-life management scenarios: baseline linear economy, enhanced recycling, second-life dominant, and synergistic optimization. Our results reveal that the synergistic scenario achieves the highest cumulative avoided emissions of 3844 Mt CO₂-eq, representing a 12.1-fold improvement over the baseline. Monte Carlo uncertainty analysis (n = 10,000) confirms robust scenario differentiation, with 100% probability that synergistic optimization outperforms enhanced recycling alone. Material security analysis shows that recycled supply can meet 100% of lithium, cobalt, nickel, and copper demand by 2060 under optimal management. These findings provide quantitative evidence for chemistry-differentiated battery management policies aligned with China’s dual carbon goals and the transition toward a sustainable circular economy.