This study examines the differential impacts of climate change and renewable energy on income inequality in high-income and middle-income countries using penalized regression techniques including LASSO, Ridge, and Elastic Net models. Drawing from panel data from 53 countries between 2000 and 2021, the study explores key determinants of income inequality, including GDP per capita, employment structure, access to electricity, renewable energy consumption, and natural resource rents. The findings reveal that economic growth and employment in services significantly reduce income inequality in high-income countries, while access to electricity and renewable energy present more complex effects, sometimes widening inequality. In middle-income countries, improving energy infrastructure and fostering economic growth are critical for reducing inequality, though reliance on natural resources and trade may have adverse effects. The results highlight the need for tailored policy interventions: high-income countries must focus on equitable energy access and managing globalization’s effects on inequality, while middle-income countries should prioritize expanding energy infrastructure and sustainably managing natural resource revenues to ensure inclusive growth. The study’s insights into the role of renewable energy in addressing inequality provide a foundation for future research, particularly in exploring how energy transition policies can be designed to promote both environmental sustainability and social equity.