Norway will allow fish farms to increase output by around 5 percent, or 60,000 tones a year, but only if they meet stricter regulations on sea lice, the biggest challenge for the sector, Fisheries Minister Elisabeth Aspaker said on Monday.
The new measures could reduce sea lice by around 30 percent, Aspaker told a news conference.
"The capacity increase will take effect from 2015," she said.
The government simultaneously abandoned a proposal from a group of experts that would have allowed fish farmers to calculate their quotas (MTB) on a rolling average basis, which could have resulted in an even larger capacity increase.
The long-term average output growth from Norwegian fish farms has been about 10 percent per year.
Several fish farmers, including top producers like Marine Harvest and Cermaq, had criticized the original proposal, arguing the problems with sea lice should get top priority.
"We are very satisfied that the minister is now moving away from the previous proposal of a rolling average MTB," Cermaq Chief Executive Jon Hindar told Reuters, adding that the proposal announced Monday is "consistent with the company's view that the industry needs to keep growing in a sustainable manner".
"At first glance, this is very positive," Hindar said.
But the new plan may limit output growth by even more than the government has proposed, as the environmental goals will be tough to meet, analyst Kolbjoern Giskeoedegaard at Nordea Markets said.
"The conditions are so strict that only companies operating in Troms and Finmark can meet them, said Giskeoedegaard, pointing out that sea lice is a less prevalent phenomenon in Norway's two northernmost counties.
These areas represent about 15-20 percent of the total salmon production in Norway, and several of the fish farmers located there have chosen not to use all of the capacity they have today.
"My assumption is that this will only give a production growth of between 15.000 to 20.000 tonnes next year, which is a very moderate growth", said Giskeoedegaard.
Fish farmers must pay a 1.5 million Norwegian crown ($244,300) fee for each of their 1,000 existing licenses to be allowed to increase output.
The government will not launch any new rounds to award additional licenses until 2017 at the earliest, Aspaker said.
Norway is the world's biggest salmon farmer with around half of the global output and its top producers include Marine Harvest, Salmar, Cermaq, Leroey, Grieg Seafood and Norway Royal Salmon.
The fish farming shares easily outperformed the overall Norwegian stock market, with Marine Harvest up by 1.6 percent and Leroey Seafood the top gainer, up 3.8 percent, by 0940 GMT (5.40 a.m. EDT). The Oslo benchmark index was meanwhile up by 0.3 percent.