Krugman's free lunch in cap and trade?

Comments on Paul Krugman “Pigou, Glenn Beck, and the false case against cap-and-trade”, 25/09/2009, http://krugman.blogs.nytimes.com/2009/09/25/pigou-glenn-beck-and-the-false-case-against-cap-and-trade/

While Krugman is arguing that others have either got the economics wrong or were deliberately misleading the readers, I also find that his use of economics may have some problems. For example, he says:

"And the burden on households from cap and trade depends on what’s done with the rents. In the original Obama plan, the rents would be used to pay for middle-class tax cuts; in Waxman-Markey, many of the permits are initially granted to utilities — but since these utilities’ profits are regulated, many of the rents would end up being passed on to consumers through lower prices."

Krugman's argument of lower prices to be passed on to consumers is unlikely to be true. The price is unlikely to be any lower than it is now due the permits granted to utilities. To the most it may not be higher, if and only if utilities got all the permits they need as business as usual. If they get less permits than they need their costs will increase and as a result their price will rise.

It is only natural that when some costs (as shown as the negative externality Krugman talks about) that are not accounted for will be accounted for under the cap and trade, there will be a fall in the welfare of the nation and the world. Otherwise there would be free lunch available.

While Krugman somehow created an illusion that the price of utilities will be lower, whether it was attempting to mislead or something else is unclear.