Wild Atlantic salmon populations are declining. Since the 1970s, the proportion returning to Norwegian rivers has been almost halved, while Norwegian sea farming has undergone massive industrialization and expansion. As the proliferation of sea lice is an important part of the explanation for the decline in wild salmon, Norway has enacted increasingly stricter regulatory thresholds for the average number of lice per farmed fish at production sites. This study shows that setting stricter thresholds has led to declining lice-levels within sea farms, but that more frequent de-lousing measures to ensure compliance leads to farmed-salmon welfare problems and higher mortality rates. Compliance with stricter thresholds has not lessened the sea-lice infestation pressure on surrounding, wild salmonid populations. The environmental effectiveness of such regulation is thus limited. This raises the important question of whether a regulatory regime focused on minimizing the average number of sea lice per farmed fish may do more harm than good, unless accompanied by a broader set of regulatory instruments targeting other variables that affect sea-lice infestations in the wild salmon habitat.