This study explores whether climate policy can contribute to economic development and poverty reduction in developing countries. It reviews relevant literature with regard to climate change, human and economic development, and the corresponding policy implications. The main research question addresses the relationship between climate policy and poverty reduction strategies. The review of several studies on Clean Development Mechanism (CDM) projects under the Kyoto Protocol indicates that the potential of the CDM to deliver pro-poor benefits is rather limited and biased towards emission reduction objectives. The results show that institutional quality, lack of financial resources, and the current design of CDM projects can hinder sustainable development in developing countries. In some cases a potential trade-off between environmental policies and poverty reduction could be revealed.