The Keystone XL Pipeline Approval Act (S.1) sits on display at the U.S. Capitol in Washington, D.C., U.S., on Friday, Feb. 13, 2015. (Andrew Harrer/Bloomberg)

CLIMATE CHANGE warriors of all stripes were focused on the White House on Tuesday, where President Obama vetoed a bill that would have authorized construction of the Keystone XL pipeline. Like all the other attention slathered on this overblown issue, the focus was misplaced. It would have been better placed on the Capitol, where Rep. Chris Van Hollen (D-Md.), without much fanfare, reintroduced a bill that would address the nation’s greenhouse-gas emissions in a serious way.

The Keystone XL controversy has occupied a far larger share of the national debate than it deserves. Environmental activists turned what should have been a routine infrastructure question into an existential war, styling it as a test of Mr. Obama’s commitment to fighting climate change. Conservatives responded with misleading claims about the number of jobs the project would create, and Republicans bizarrely chose to make the pipeline their top order of business after taking control of the Senate. With his veto, Mr. Obama refused once again to settle an issue that has been delayed for a ridiculous length of time.

Environmentalists should have kept their sights higher, on creating a national carbon policy that would reduce demand for dirty fuels, cutting emissions by attacking the root problem.

There have been many advocates for this sort of policy over the years — including Republicans, such as Sens. Susan Collins (Maine), Lindsey O. Graham (S.C.) and John McCain (Ariz.). GOP senior statesman George P. Shultz has argued for this sort of plan, too. Mr. Van Hollen’s market-based version is elegant and effective. It would put a slowly declining cap on the country’s carbon dioxide emissions, requiring an 80 percent cut by 2050, and rely on basic economics, not Environmental Protection Agency commands.

Firms putting coal, oil or natural gas into the U.S. market would have to buy permits that account for the carbon dioxide those fuels release when burned. That is, energy companies would finally have to pay the full cost of the products they sell. The buying and selling of limited numbers of permits would raise the cost of carbon-heavy goods and make alternatives relatively more attractive. In their everyday purchasing decisions, companies and consumers would determine how best to wring greenhouse emissions out of the economy.

The government would raise a lot of money in permit auctions, but Mr. Van Hollen’s bill would give all of it back, sending rebate checks to every American with a Social Security number. Mr. Van Hollen reckons that 80 percent of U.S. households would come out ahead, despite the higher cost of gasoline and other carbon-dependent products.

Encouragingly, anti-Keystone XL leader Bill McKibben joined Mr. Van Hollen on a Tuesday conference call boosting the bill. This is a market-based plan that environmentalists should march for and Republicans should embrace. The impact would dispatch Keystone to the footnote it deserved in the first place.