OAKLAND, Calif. — The distribution of free carbon emissions permits to European Union utilities has the potential to yield the companies windfall profits, according to a new report.

The profits could top $100 billion for power companies in the United Kingdom, Germany, Spain, Italy and Poland between 2008 and 2012, the report from WWF and Point Carbon found. The EU plans to start selling the carbon permits for its Emissions-Trading Scheme (ETS) in 2013.

The report comes as the U.S. and other countries explore their own cap-and-trade systems to create a market-driven approach to reducing GHG emissions. All three U.S. presidential candidates favor a cap-and-trade arrangement utilities would have to buy the emissions permits at auction.

"We have long been critical of the ETS design faults that provide cash for coal in the name of emissions reduction," said Sanjeev Kumar, WWF emissions trading scheme coordinator. "But Europe's experience should be a stark warning to the rest of the world on the danger of free allocations of pollution permits."

Until 2013, German power companies, in particular, stand to gain the most even though the industry is highly dependent on emissions-intensive coal. The report found that the free allocation reduced the incentives for dirty power plants to invest in low emissions technology.