Government subsidies in the power battery recycling industry

Purpose: The power battery is the core of a new energy vehicle and plays a vital role in the rise of the new energy vehicle industry. As the number of waste batteries increases, firms involved in the industry need to properly dispose them, but what party is responsible remains unclear. To reduce environmental impacts, governments introduce two subsidy policies, i.e. collection subsidies, which are provided to the collecting firms, and dismantling subsidies, which are provided to the dismantling firms. Design/methodology/approach: Based on the different characteristics of the subsidies, we develop a stylized model to examine the collection strategies and the preferences over the subsidies. Findings: We derive several insights from analysis. First, the collection strategies depend on the fixed collection cost. Second, the key factor determining the firm's subsidy preference is the efficiency of dismantling. Finally, if the primary target is the collection rate, governments prefer to provide collection subsidies. If consider the environmental impact, the choice of subsidies has to do with the efficiency of dismantling. Moreover, from a social welfare perspective, the raw material cost and the efficiency of dismantling are core indicators of decision. Originality/value: This work develops the first analytical model to study two power battery subsidies and investigate the optimal collecting strategies and subsidy preferences. The insights are compelling not only for the manufacturer and the third party but also for policymakers. Peer review: The peer review history for this article is available at: https://publons.com/publon/10.1108/IMDS-08-2019-0450.