Mankiw still confused on cap-and-trade

Greg Mankiw, whose blog is among my favorites, has an op ed in the NYT lamenting "a missed opportunity on climate change":

The problem occurred as this sensible idea made the trip from the campaign trail through the legislative process. Rather than auctioning the carbon allowances, the bill that recently passed the House would give most of them away to powerful special interests.

... The problem arises in how the climate policy interacts with the overall tax system. As the president pointed out, a cap-and-trade system is like a carbon tax. The price of carbon allowances will eventually be passed on to consumers in the form of higher prices for carbon-intensive products. But if most of those allowances are handed out rather than auctioned, the government won’t have the resources to cut other taxes and offset that price increase. The result is an increase in the effective tax rates facing most Americans, leading to lower real take-home wages, reduced work incentives and depressed economic activity.

Once again, Mankiw does not seem to understand that the majority of the "giveaway" permits are allocated such that they will effectively be rebated to consumers (the 30% to regulated power companies, for example). The big exception is for refined petroleum products like gasoline, which will experience a de facto tax increase - but isn't that what Mankiw wants?