This working paper explores some of the drivers and challenges affecting countries’ climate compatible development (CCD) policy processes and their incentives for engaging on this agenda. The paper argues that there is not a straightforward relationship between CCD policies and outcomes such as growth, poverty and equity. There will be winners and losers, and trade-offs among social, economic and environmental goals and between long-term and short-term benefits. This makes the political and institutional dimensions of CCD particularly challenging. According to the paper, understanding and managing the political economy of CCD is essential to promoting and strengthening climate compatible development outcomes and overcoming barriers to implementation. In addition to outlining some of the key drivers and challenges of CCD strategies, the paper provides possible solutions to overcoming the identified barriers.