High doses of mercury can cause nerve damage. Last week, the government warned that some fish contaminated with mercury can pose a hazard to children and to women who are pregnant or nursing.

Coal contains trace amounts of mercury. Because power plants burn millions of tons of coal each year, they release a significant amount of mercury.

Three months ago the Environmental Protection Agency offered two options for reducing the 48 tons of mercury emitted each year from the nation's 1,100 coal-burning power plants, the largest source of the pollution. One favored reliance on a short-term technology, the other on long-term market forces through which companies could buy rights to continue polluting from companies that do more than is required.

But studies co-sponsored by the Energy Department and the utility industry have found that there is no existing technology to remove mercury equally well from various types and grades of coal. EPA officials say that makes the first option to reduce the pollution to 34 tons by 2008 less feasible.

That leaves the second strategy - endorsed by industry - that would establish a nationwide cap of 15 tons on mercury pollution by 2018 by phasing in lower ceilings on each plant's pollution. Plants that reduce th eir pollution below a yet-to-be-determined ceiling for each one could then sell credits to plants that don't.

"The debate is what's the best option, given the available technology. And we think that given the state of technology, cap- and-trade is better - and we're leaning that way," said EPA spokeswoman Cynthia Bergman.

The EPA can turn to that approach only because the Bush administration decided in December that mercury should not be regulated as a toxic substance requiring maximum pollution controls, reversing a decision of President Bill Clinton's administration.

To meet a court-ordered deadline in a lawsuit brought by the Natural Resources Defense Council 12 years ago, the agency must issue a final decision before the end of the year.