This article examines whether there exists any causal relationship between foreign trade and declining pollution in developed countries. In other words, do developed countries outsource their problems to less developed countries rather than solve them? The case study is the Swedish economy and the two environmental indicators employed are energy consumption and CO2 emissions. No causal relationships are found, since Sweden has long been a net exporter of embodied energy and CO2 and continues to be so after 1970, when energy consumption stabilizes and CO, emissions decline. In addition, the ratios of net exported energy and CO2 to total consumption remain stable, which means there were no effects on the energy intensity or CO, intensity either. These results suggest that internal forces, like efficiency improvements, changed consumption patterns and transformation of the energy system, have been crucial for relative environmental improvement in Sweden, while foreign trade has played no role. (c) 2005 Elsevier Ltd. All rights reserved.