Sustainability of retired automotive lithium-ion batteries (LIBs) has drawn growing attention as large volumes of LIBs will start to retire in the coming decade, while LIB demand continues to grow. Second life and recycling are considered sustainable solutions to waste management of LIBs. However, the environmental and economic benefits of second life and recycling depend on specific battery chemistries. Here we show that high-performance LIBs could provide more environmental benefits through full material and energy recovery. Moreover, LIB’s second life in stationary energy storage systems could lessen the heterogeneity between different types of LIBs and different recycling methods in terms of both environmental and economic performances. When connected to the power grid in Texas, we found that introducing second life into the life cycle of multiple promising high-performance LIBs reduces carbon footprint and cumulative energy demand (CED) by 6%–11% and CED by 4%–8%, respectively. The corresponding carbon footprint and CED can be further reduced by 16% and 27% in major LIB manufacturing and consuming countries (The United States and China) due to projected renewable energy transition by 2050. Lastly, direct cathode recycling is found to have the most reduction in environmental impacts, although its economic performance is less ideal, compared to pyrometallurgical recycling.