The increasing accumulation of sewage sludge from wastewater treatment presents both environmental and economic concerns. This study proposes a sustainable valorization approach by converting sludge into porous carbon materials for lithium metal battery applications. Sludge underwent chemical pretreatment, pyrolysis at 800 °C, and KOH activation to yield carbon (Sludge C) with tailored structure and functionality. Physicochemical characterization confirmed a microporous structure, oxygen-rich surface groups, and partial crystallinity due to residual inorganic elements such as Si, Al, and Fe. Compared to commercial Super P, Sludge C exhibited lower lithium nucleation overpotential and improved cycling stability, attributed to its lithiophilic species and high surface area. A techno-economic analysis compared sludge carbonization with incineration, composting, and biohydrogen production. Despite higher capital costs, sludge carbonization offered promising value recovery through electrode material production. This study highlights a scalable and eco-friendly pathway for transforming sewage sludge into functional materials for energy storage, supporting waste minimization and circular bioeconomy goals.