Today’s world in the phase of rapid development needs energy and most of the energy comes from non-renewable sources which hampers sustainable development objectives. To achieve this objective, the world is moving away from traditional investment towards green capital. In addition to this, green capital investment is an investment in those things that help the country with the energy transition. On the other side, the goal of green capital investment, and energy transition is to reduce carbon emission and achieve the sustainability objective. For this reason, the present study examines the interrelationship between energy transition, green capital, and \({\text{CO}}_{2}\) emissions in the world’s developed and developing countries using the dynamic panel data analysis for both the developed and developing countries based on annual data from 2012 to 2021. The panel cointegration test result shows the existence of a long-term and permanent association among energy transition, green capital, and \({\text{CO}}_{2}\) emission in both the group of countries. Further, the panel vector error correction result shows the errors are corrected and that the direction of causality is running combinedly from energy transition and green capital to carbon emission only for developed countries in the long run, whereas according to the causality test results, carbon emission is caused by energy transition and green capital in the short period for both the groups of countries. So, the governments of the countries should increase the ratio of investment in green capital to the GDP, so that the sustainability objective can be achieved.