European experience is that, just as standard economics predicts, giving away carbon credits which can be traded by the recipients for non-zero price results in price increases by those recipients.  i.e., windfall profits for utilities and other carbon-intensive emitters.

It's simple to understand why this must be the case.    If I'm running a utility I decide the price for electricity based on what I need to do to satisfy investor demands for return on capital (assuming a competitive market).  Suddenly my cost base goes up because I'm charged for carbon emissions, and at the same time I'm given credits worth the same amount which I can trade for cash.  I see these as two completely different things.  The credits are effectively cash - ok what should I invest that in - certainly not in paying the emission cost as that generates no return.  The emission cost increase means I'm going to have to raise prices to cover the emission cost - and I'm confident I can because I see all my competitors just got hit with the same emission cost.  So, prices go up and the carbon credit value is a windfall profit to me.