Abstract: This paper considers the problem of an imperfectly informed regulator constrained in his choice of environmental regulation by the political opposition of those affected by the policy. We compare the value of two types of information to the regulator: the social cost of
pollution and the profi tability of firms present in the economy. We find that in environments where small increases in the losses to regulated firms greatly a ffect the regulator's ability to implement the policy, it is most valuable to learn the types of firms, while it is most valuable to learn the social cost of pollution when small increases in losses are relatively ine ffectual.
Keywords: Environmental Policy, Pollution, Optimal Taxation
JEL Classification: H23; Q52; D81