In theory, pollution could be addressed by imposing physical restrictions on stocking rates, by introducing
market-based pollution abatement instruments, or by altering property rights to the lagoon water. Physical
restrictions include limits on production (output quotas), on inputs used (input quotas) or on the amount of pollution
discharged (pollution permits). Market-based measures refer to instruments like input taxes, output taxes, pollution
taxes, tradable output or input quotas, and tradable pollution permits. The environmental outcomes of non-tradable
and tradable quotas are the same as they both dictate limits on production. They also entail similar challenges in
monitoring and enforcing. However, transferable quotas are expected to result in better allocative efficiency over
time as they impose an opportunity cost on less effective farmers who stand to earn more by selling or leasing their
quotas to more effective farmers. To better realise these allocative efficiency advantages, input and output quotas
should be detached from farmers’ rights to the lagoon water and lagoon bed. In the sections that follow, all
references to quotas imply tradable quotas.