The transportation sector is the primary catalyst for environmental deterioration on a global level. Growing concerns about environmental issues caused by the overuse of fossil fuels in this industry have prompted countries to prioritize eco-friendly and energy-efficient vehicles. Electric and hybrid vehicles offer a potential solution to the global challenge of meeting carbon neutrality objectives, especially in the transportation sector. In this context, this study focuses on the comparative impact of technological development in conventional, hybrid, and electric vehicles on the load capacity factor (LCF) and carbon emissions (CO2) in the G7 countries over the period 2000–2021. For this purpose, the regularized common correlated effects (rCCE) approach is applied. The empirical outcomes indicate that (i) developments in conventional vehicles are detrimental to the environment; (ii) technological advancements in hybrid vehicles are ineffective in responding to carbon neutrality efforts; (iii) developments in electric vehicles contribute to environmental sustainability.