• With: James Freeman, Steve Moore, Kim Strassel, Matt Kaminski

    This is a rush transcript from "Journal Editorial Report," January 26, 2013. This copy may not be in its final form and may be updated.

    PAUL GIGOT, HOST: This week on "The Journal Editorial Report," President Obama's green agenda. He's promised to make climate change a priority in his second term. Why it may end up costing you big.

    Plus, Phil Mickelson, pro golfer, says that high taxes may drive him out of California. We've got some suggests on what states he should consider if he moves.

    And Hillary Clinton's swan song. A look at her performance this week on Capitol Hill and her legacy as she prepares to leave Washington, at least for now.

    (BEGIN VIDEO CLIP)

    PRESIDENT BARACK OBAMA: We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations.

    (APPLAUSE)

    (END VIDEO CLIP)

    GIGOT: Welcome to "The Journal Editorial Report." I'm Paul Gigot.

    That was President Obama in his inaugural address Monday, promising to make global warming a top priority in a second term. It's an issue that is sure to bring some fierce policy showdowns. The first of which may come under the Keystone XL Oil Pipeline which has been under review since 2008. Governor Dave Heineman approved a revised route for the pipeline through Nebraska this week, the final hurdle to the project at the state level. And 53 senators, including nine Democrats, sent a letter to the White House on Wednesday urging President Obama to expedite its approval.

    And joining the panel this week, Wall Street Journal assistant editorial page editor, James Freeman; senior economics writer, Steve Moore; and Washington columnist, Kim Strassel.

    So, Kim, where did that come from?

    (LAUGHTER)

    I don't remember the climate change being something that the president talked a lot about in the campaign, if at all.

    KIM STRASSEL, WASHINGTON COLUMNIST: Surprise.

    GIGOT: It's sort of the stealth issue.

    (LAUGHTER)

    GIGOT: And he didn't even wait for the State of the Union. It's in the inaugural address. So, what's going on here politically?

    STRASSEL: Well, I think some of us did think it was coming. Remember, this was a high priority of his back in 2008 when he campaigned. But they got beat up on it. They lost that fight in 2009, they decided to put it aside and not talk about it in the election. And here we are, back with his promise.

    And what was more interesting, too, is not only did he make that promise, but you had somebody like Barbara Boxer, who is the Senator from California, big climate person, she gave some details, too, about how they intend to pursue this. Namely, they're going to go through the EPA to do a big carbon regulation program, and they are also thinking of putting in place a carbon tax.

    GIGOT: Uh, oh. Well, we'll talk a little about that.

    Steve, so is this really a regulatory agenda? I don't think that Cap and Trade, the old program, can pass even a Democratic Senate. It couldn't the first time when they controlled everything.

    STEVE MOORE, SENIOR ECONOMICS WRITER: Yes, there's a reason that President Obama almost never mentioned the words "climate change" and "Cap and Trade" during the campaign, Paul, because they're political losers. They're big tax increases on workers, on union workers, on manufacturing workers. And so, the Democrats have avoided that issue. Now that they've won this election, they've sort of sprung it on people.

    I still don't believe the votes are there in the United States Senate or the House to pass anything like either the carbon tax, or, by the way, the Democrats are talking maybe an energy tax, like a gasoline tax. There's no political support there. And that's why I think Kim is right. If they're going to do this, it's going to have to be through the regulatory angle of basically trying to outlaw carbon in that way, yes.

    GIGOT: OK.

    But then, James, why mention it so prominently. Or was this sort after bait and switch for the environmentalists? You mention it rhetorically, and you say, oh, boy, I'm really behind you. And then, in policy terms, you don't given them any.

    JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Right. Well, there may be some bait and switch. But I think this is the key. If he doesn't need to get anything through the Congress, as the "Potomac Watch" column in Friday's Journal --

    GIGOT: That's written by Kim Strassel.

    FREEMAN: -- pointed out so well, there's a lot of regulatory authority they think they have. A court decision a few years empowers them to regulate carbon. They think they're off to the races here. So this suggests to me that maybe the play is, with all of the business community expecting an approval of the Keystone Pipeline, the president might approve the pipeline, but then really ratchet down on the use of the oil going through that pipeline. And I think he might be able to say to environmentalists --

    GIGOT: But how does he do that? Because they're not going to build this thing with -- I don't think there's a lot of oil that's going to through it.

    FREEMAN: Well, certainly, the people that want that oil are expecting a big market. But if he's -- at the end of that pipeline, once it goes out into the economy, if the president is severely restricting how it's used, how it's used in transportation and in manufacturing, as Senator Boxer has said, I think he could say to environmentalist, look, the end user is going to get hit hard here. We're going to reduce this energy consumption. And maybe he goes ahead and provides those construction jobs with the pipeline.

    GIGOT: Is that a --

    (CROSSTALK)

    MOORE: Can I make a related point here, Paul, about the pipeline and carbon change? Because it's interesting if you really care about global warming and you want to reduce carbon emission, there is no question the most important thing America can do, would be to transition towards natural gas, which we have a huge abundance of. It is cheap. It is abundant in the United States. And it does not emit very many carbons into the atmosphere. And yet, the left is against that, too. And we need pipelines to get the natural gas to the markets.

    GIGOT: That's because the natural gas would take the place of coal, which is a much bigger --

    MOORE: Right. Exactly.

    GIGOT: -- carbon, especially in terms of utilities and electricity.

    Kim, is that the play, what James Freeman was talking about, the trade of maybe get Keystone going, allow fracking to go ahead, but impose a carbon tax here, which would be potentially a huge revenue raiser? But if you start small on it, you still raise a lot of money but, over time, you can ratchet that thing up.

    STRASSEL: You have to assume that's the win-win play for the president. Because, look, what he's got to balance here is making his environmental left happy, which he did by putting out the comment that they're going to address the climate threat, but he's also sitting on top of this energy renaissance in the country, this huge new boom in natural gas and oil. And we saw in the election that he wanted to take some credit for at that.