In recent years, Mongolia’s pastureland has been shrinking due to overgrazing and a rapid growth in the number of livestock. Pastureland capacity is commonly classified further into ecological carrying capacity and economic carrying capacity. In the case of Mongolia, there has not been any research done on this topic despite its recent saliency. As shown in international research studies, the ecological carrying capacity is usually less than the economic carrying capacity. In order to reduce the difference between the two, livestock taxation and quotas are used. The main purpose of our study is to define both the ecological and economic carrying capacities of Mongolia’s pastureland and to assess the impact of implementing a livestock tax on the economic carrying capacity. The research team estimated a pasture use index (PUI) consisting of the ratio of biomass consumption to potential biomass using the long-term normalized difference vegetation index (NDVI) in order to assess the pastureland degradation of 330 soums.