Tony Abbott beat incumbent leader Malcolm Turnbull, by 42 votes to 41.

Mr Abbott has vowed to block the Emissions Trading Scheme in the Senate, where Prime Minister Kevin Rudd's Labour Party does not have a majority.

Mr Rudd had wanted the legislation approved before the UN climate change summit in Copenhagen next week.

Correspondents say rejection of the ETS in the Senate would hand the popular Rudd government a trigger for a snap election.

'Great big tax'

Last week, Mr Rudd secured Mr Turnbull's support for the ETS, but it prompted a leadership challenge from some Liberal MPs, who questioned the scientific case for global warming and said they believed the legislation might damage Australia's economy.

Many moderate Liberals are terrified. Malcolm Turnbull had warned that his once-dominant party would face an electoral catastrophe if it appeared before the electorate as the party of climate-change scepticism Nick Bryant, BBC News, Sydney Read more Profile: Tony Abbott

At a party meeting in Canberra on Tuesday, Mr Turnbull was narrowly defeated by Mr Abbott in the final round of voting. A third challenger, Shadow Treasurer Joe Hockey, was eliminated in the first round.

Minutes after his surprise victory, Mr Abbott told a news conference that he would fight the ETS bill in the upper house of parliament.

"We will seek to refer the legislation to [a Senate] committee for further scrutiny. If we cannot get the support for that course of action we will oppose the legislation in the Senate this week," he said.

"I think on something of this magnitude, it is much more important to get it right than to rush it," he added.

Mr Abbott said millions of Australians were concerned that the ETS was in reality "a great big tax to create a great big slush fund, to provide politicised hand-outs run by a giant bureaucracy."

"I am really not frightened of an election on this issue," he added.

Senator Christine Milne, Deputy Leader of the Australian Green Party, told the BBC World Service that Mr Abbott's election would lead to the end of the government's carbon scheme.

But she said her party would also vote against the bill, saying its "completely unacceptable" targets did not go far enough.

'Unacceptable'
The ETS, aimed at reducing Australia's carbon emissions by up to 25% below 2000 levels by 2020, is the centrepiece of the government's environmental strategy.

Australia has the highest per-capita carbon emissions among developed nations and coal is its biggest export.
Mr Rudd's immediate hopes of passing the bill before the Copenhagen summit now rest on the possibility of some opposition lawmakers rebelling and voting with the government.

But if the Senate fails to back the scheme -- as correspondents say looks likely -- Mr Rudd could dissolve both it and the House of Representatives, and call snap elections at any time under constitutional rules meant to resolve deadlocks between the two chambers, correspondents say.

Opinion polls suggest Labor would win and could then pass its carbon trading legislation in a joint sitting of parliament.

However, the BBC's Nick Bryant in Sydney says the issue is complicated by the onset of the southern summer and Christmas, when political hostilities tend to be put on hold.

Link:  http://news.bbc.co.uk/2/hi/asia-pacific/8387653.stm