THE battle for the Liberal Party leadership has erupted into a three-way contest after Joe Hockey refused to bow to the demands of climate change rebels to block Labor's emissions trading scheme.
This caused Tony Abbott to throw his hat into the ring last night and declare himself the anti-ETS candidate.
Today's battle pitches the incumbent, Malcolm Turnbull, a supporter of voting for the amended ETS that the Liberals negotiated with Labor, against Mr Abbott, who opposes the scheme, and Mr Hockey, who will promise a free vote for all Liberal MPs and senators.
Mr Abbott's decision to stand sent the number crunchers into a frenzy as they tried to work out who would prevail, with Mr Hockey being the slight favourite. ''It's just too fluid,'' said one.
The extraordinary development came after the collapse of a right-wing plan by the South Australian senator Nick Minchin and Mr Abbott, the MP for Warringah, to replace Mr Turnbull with Mr Hockey.
Under the original deal, Mr Hockey would take over the leadership if he supported delaying further Senate debate on the ETS until February, which would have led to the scheme's defeat. And Mr Abbott was only going to challenge Mr Turnbull if Mr Hockey did not stand.
But Mr Hockey was conscious that striking such a deal with the right would require him to compromise his own principles on climate change policy and be labelled a puppet of Senator Minchin and Mr Abbott.
After a day of meetings and heated talks with Senator Minchin, Mr Abbott and other senior colleagues, Mr Hockey declared last night he would stand for the leadership and, if successful, grant a free vote on the ETS legislation.
The free vote would be the first granted to federal Liberals since John Howard allowed a free vote on the republic in 1999.
It would also make probable the passage of the ETS through the Senate.
The Government needs only seven Liberals to vote with it and last night Liberal Senate sources estimated at least nine would be willing to do so.
Under Mr Turnbull's previous policy of support, senators had been intimidated against voting for the scheme by having their preselections threatened and being bombarded with hate mail.
''This will relieve pressure on a lot of people,'' said one pro-ETS Liberal senator last night.
Mr Abbott agreed that a free vote would allow the scheme to pass. He turned on Mr Hockey last night, saying the party now had a clear choice between himself, an opponent of the ETS at all costs, and Mr Turnbull and Mr Hockey.
Mr Abbott said the ETS was a policy issue, not a matter of conscience. ''It is just not possible for a credible party to have a free vote,'' he said.
''A credible party has to have a position.''
The Liberal party room will meet at 9am today. Mr Abbott will move a motion to spill the leadership and it is expected to receive majority support.
There would then be a three-way ballot for the leadership, with one candidate knocked out in the first round.
Kevin Andrews, the Victorian MP who mounted a challenge last week, was still considering last night whether to nominate as well.
Senator Minchin was livid after his deal collapsed and said last night that he would back Mr Abbott.
''I continue to support the proposition that the bill should be referred to a Senate inquiry, to report back after the Copenhagen conference,'' he said.
Mr Hockey will run with the Queensland MP Peter Dutton as his deputy. Mr Abbott will run on a ticket with Julie Bishop. Mr Turnbull has no ticket.
Ian Macfarlane, who negotiated the ETS deal with Labor and who has stuck by Mr Turnbull throughout the saga, said: ''It's indescribable what's gone on in the last week''.
Earlier yesterday, Mr Hockey went to see Mr Turnbull to tell him that he would be challenging should the spill motion be carried.
However, he said, he would not support the spill motion.
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