“Higher energy costs generally mean that consumers must spend a larger percentage of their income to maintain their current level of household energy services.  At the same time, significant quantities of energy are needed to produce and transport the many non-energy goods and services.  The projected higher costs of these goods and services would be expected to magnify the loss in household purchasing power associated with the direct purchase of energy services.  At the same time, higher energy costs across the economy as a whole would lower income.  We have ...

As we have seen in previous articles, the cost associated with cap and trade regimes are often disproportionately borne by the lowest segments of the economic distribution, and the benefits most often accrue to those in the highest segments.  This is true whether the allowances are given away for free by or purchased from the government.  The mechanism by which this phenomenon operates is explained by the Congressional Budget Office in its recent analysis of Waxman-Markey: 

“The cost of obtaining allowances would be passed into prices ...