<p>Emission reduction investment is a crucial business policy not only to ensure environmental sustainability but also to maintain economic viability for companies in today’s highly competitive business environment. For the first time, this paper identifies the optimal emission-controlling investment decision under government subsidy frameworks for a company dealing with deteriorating items within prepayment and delay payment mechanisms. Employing the upstream partial prepayment, the retailer remits payments to the supplier in installments, whereas employing the downstream partial delayed payment, the retailer receives a fraction of the selling price from customers after the sale. Integrating payment mechanisms, partial backordering, and investment practices for deteriorating items, this study establishes one of the initial comprehensive inventory systems to address both environmental and financial challenges concurrently. Furthermore, this study employs two distinct government subsidy schemes, investment-based subsidies (IBS) and performance-based subsidies (PBS), to investigate how government subsidies impact green technology investment aimed at promoting environmentally sustainable practices. After developing three different models under both subsidized and unsubsidized conditions, optimal decisions are derived analytically, which are then integrated into the development of effective solution algorithms. The numerical results reveal that green investment substantially improves cost efficiency, achieving savings of 3.85%, 4.06%, and 4.29% under the green technology, IBS, and PBS schemes, respectively, compared to cases without green investment. Notably, the model within the PBS framework demonstrates the highest effectiveness by generating the most significant cost savings and sustainability benefits.</p>