Although the dioxin alarm broke at the same time in Sweden and the US in the mid-1980s, Swedish pulp and paper (P&P) firms led the way towards the new market for low-chlorine and chlorine-free P&P products. This study explores the transition in the Swedish P&P industry and contrasts the Swedish case to the US experience. We highlight the importance of already established technological paths to deal with pollution, paths which were strongly formed by the different national environmental policies since the 1970s. Thus while US P&P firms were technologically locked-in when the dioxin alarm broke, the strategy of Swedish P&P firms to proactively collaborate in environmental research and development (R&D) together with a national policy that favoured process integrated abatement technology, helped Swedish firms take technological leadership. This article particularly stresses the implications of technological path-dependency and different national regulatory styles in understanding the evolution of different modes of corporate environmental strategies.