Abstract: The implementation of recycling activity is of great significance to closed-loop supply chain operations. Consumers’ environmental awareness and governmental subsidy are considered in the two-echelon closed-loop supply chain. Two types of decision-making structures are proposed under different carbon emission regulations. The subsidy sharing mechanism is designed to resolve the channel members’ conflict caused by double marginalization. This paper provides insight into the effect of environmental awareness and government subsidy under different low-carbon regulations on the supply chain benefit and social welfare via the game theory. The analysis results display that the government subsidy and subsidy sharing mechanism are profitably beneficial to the whole supply chain and social welfare. Moreover, a noteworthy result reveals that social welfare is not always directly proportional to consumers’ environmental awareness. Social welfare decreases slightly with the increase in consumers’ environmental awareness when consumers’ environmental awareness is weak. However, social welfare will be significantly improved when consumers’ environmental awareness increases beyond a certain threshold.

Key words: Closed-loop supply chain, Recycling, Coordination, Social welfare, Game theory, Carbon emissions