The week that was has left the Libs in a bigger mess than ever

THE Liberals have come out of a head-spinning week with fresh confusion in their emission trading policy and their collective finger on the "pause" button in regard to leadership. It's been shambolic.

A week ago, Brendan Nelson seemed set to harden the Opposition policy on emissions trading to say the start of an Australian scheme should be conditional on the big emitters committing to action.

Like an adventurous schoolboy, he climbed out on this particularly limb shouting "look at me!" His shadow cabinet looked, and promptly reached for the saw. His opponents were numerous but the surprising thing was that not even his supporters were backing his idea by the time shadow cabinet met on Tuesday. In the end, Nelson didn't even pitch for himself. He asked his frontbench colleagues what they thought and then acquiesced as they did him over.

But being Brendan, he was undeterred by what would be a body blow to any other leader. He abandoned that plan and went back to what has been the Coalition's line - that Australia shouldn't wait for the world.

What's more, the next day he went into the Coalition party room and declared that the disaster of the past few weeks - when he was contradicting and undermining shadow treasurer Malcolm Turnbull, environment spokesman Greg Hunt and deputy leader Julie Bishop over emissions trading - had been completely his fault. Of course, he was exactly right, but leaders don't often confess. The approach worked with some. "Brendan is quite good at cleaning up his messes," one backbencher said later. And even better at making them, the sharp-tongued would observe.

Having done his mea culpa during the chaotic Coalition parties' meeting, Nelson released a policy that Turnbull would maintain is essentially the pre-election line, when the Coalition said it would start emissions trading by 2012.

But oops - under questioning on the 7.30 Report, Nelson made another mess. He left the way open for the start of a trading scheme to be possibly delayed beyond 2012.

The debate about 2012 may seem arcane - especially as the Liberals are in opposition (a point some of them had to make to colleagues on Wednesday) and Labor, the Senate permitting, should already have got a scheme started well before then.

Why the date argument matters is that it is code for the fundamental division in the Opposition between the climate believers and deniers, which this week hasn't resolved. One hardliner insists that after Wednesday's discussion "we're not committed to implementing a 2012 start date". The emissions trading policy has become like a biblical text in which various parts of the Liberals' broad church are finding support for their divergent views on what Australia should do or not do about emissions. The policy uncertainty would become relevant if the Senate blocked Labor's scheme.

Has all this hurt Nelson's leadership? Most Liberals would say so. Are the Liberals thinking of doing anything about it? Not at the moment. They've got to wait for Peter Costello to say what he wants to do.

This week's Newspoll showed that the former treasurer is miles in front of both Nelson and Turnbull in who voters think would be best to lead the Opposition (Costello 41%, Turnbull 24%, Nelson 18%). But Costello, who was having a Pacific holiday and so conveniently missed Wednesday's meeting, continues to hold the Liberals hostage to his time frame. As one puts it: "We're paralysed until Peter Costello makes up his mind."

The Costello timeline is thought to be set by his book, due out in October. Many senior colleagues believe he will leave Parliament after that.

If Costello is considering staying, he'd have a second timeline - the one he'd hope would culminate in a draft and even a bloodless handover by Nelson.

Either Costello is acting selfishly or with political calculation. Or, like the rest of the party, he's in some confusion. The Costello speculation is being ramped up - Seven last night reported he'd turned down a $2 million job with the World Gold Council. The Liberals need the ghost to disappear or turn back into substance. If Costello was out of the scene, they'd have to confront the Turnbull versus Nelson face-off (which is why they want a Costello rescue).

Meanwhile, the Coalition has to brace for another bit of unpleasantness. Having saved their skins in the Gippsland byelection, the Nationals face the prospect of defeat in Lyne, vacated by former party leader Mark Vaile. Rob Oakeshott, an independent (who was once a National), holds the state seat of Port Macquarie, polling a 67% primary vote at the last NSW election. He is now set to run for Lyne and would enter the contest as favourite. A loss by the Nationals would mean they had only nine House seats.

It would underline the case for a merger. But, despite the two parties agreeing last weekend to amalgamate in Queensland, there now seems no prospect of a merger in NSW, Victoria or nationally this parliamentary term. The rank and file in these states don't want it. Nelson flirted with the idea earlier this year but it didn't gain momentum. It turned into another bit of unresolved business, and now it is too late.

As it moves towards a year in opposition, the Coalition has, indeed, resolved very little. It has tossed out some policies that used to define it, such as WorkChoices. It has not yet replaced them. It has had some reasonable times in Parliament, but then got itself in tangles on issues such as industrial relations and climate change. Liberal MPs admit the leadership is a question mark up in neon lights. All in all, a mess that defies apology.

Michelle Grattan is political editor.