Opposition Leader Sussan Ley is facing a fresh test of her authority in keeping moderate Liberal MPs onside after the Nationals scrapped their commitment to the 2050 net zero climate target and pushed the case for the Coalition to water down its ambitions.

On Sunday, Nationals leader David Littleproud announced the junior Coalition party’s new climate policy was to bring down Australia’s carbon emissions in line with the rest of the world – a unanimous position agreed to by Nationals MPs at a party room meeting in Canberra.

“We continue to believe that we need to reduce emissions, but we’ve got to do it in a better, fairer, cheaper way for all Australians,” Littleproud said. “We believe that we can peg ourselves to the rest of the world. We’re not going to be a laggard, but we’re not going to streak ahead.”

The Nationals’ decision to dump net zero throws up a significant problem for Ley as MPs return to parliament on Monday. Three sources, who spoke on the condition of anonymity, said moderates would prefer to split the Coalition than drop net zero aspirations altogether, and some were willing to quit the frontbench over the issue.

That outcome would be disastrous for Ley, who came into the leadership with the moderates’ support and has already endured an embarrassing two weeks as colleagues questioned her political judgment over positions on Kevin Rudd’s job and the prime minister’s Joy Division T-shirt.

Coalition MPs said the net zero debate would represent the most perilous moment in Ley’s leadership to date.

“She can’t capitulate here,” one person who asked to remain anonymous to detail internal party discussions said. “You’ve got [James] Paterson, [Angus] Taylor and other senior people on the right arguing internally against dropping net zero entirely. She has a pathway through here if she stands firm.”

Some Nationals say their policy still gives Ley the option to keep a loose aspiration to net zero, rather than a mandate. But several senior figures in Ley’s camp said she needed to show leadership and articulate a strong pro-climate position this week.

Liberal MPs were also frustrated that the Nationals were wedging them on an issue that would have significant symbolic and political consequences. “The Nationals are competing with One Nation – for them, it’s positive. For the Liberals, it’s very different,” said one.

The independents who won blue-ribbon seats from the Liberals at the past three elections have all campaigned on stronger climate action, and the opposition needs to seize those seats back with a credible policy platform to form government.

Wentworth independent Allegra Spender said Ley had been left with a choice. “Either be honest that the Nationals are once again setting the Coalition’s climate policy – whatever words the Libs come up with to dress up their own policy – or split with the Nationals altogether,” she said.

Warringah MP Zali Steggall, the first successful teal MP, said the Nationals had shown they were “profoundly out of touch”.

But Littleproud said the Nationals’ decision was about “bringing common sense back to climate and energy policy”, noting it still planned to reduce emissions.

“This is about saying we’re going to live up to our commitments internationally,” he said. “We’re going to do that sensibly, but we’re going to do what they’re doing at their pace, not streak ahead.

“What I want to do is show today some leadership. There will be arguments that we’re climate deniers and we’ve been left behind. That doesn’t advance the intellectual debate in this country at all.”

The Nationals’ position was informed by policy research from senators Matt Canavan and Ross Cadell, as well as a report by Nationals-aligned think tank the Page Research Centre.

The Page report, which was briefed at Sunday’s Nationals meeting, recommended ditching net zero as a target “because it puts achieving an emissions goal ahead of improving the living standards of Australians”.

“We should reduce emissions in line with comparable nations, not ahead of them,” it said.

The report recommended adopting a “practical emissions trajectory” of 2 to 9 million tonnes in reductions a year.

This would involve maintaining the current pace of emissions reduction, at most: Australia has averaged 9 million tonnes of carbon reductions each year since 2020. Under the Albanese government’s plans, this must increase to 16 million tonnes a year to achieve the 2030 target, and rise again to 27 million tonnes a year to hit the 2035 goal.

Climate Change Minister Chris Bowen said the Nationals were betraying regional Australia, which was at the front line of the impacts of climate change.

“David Littleproud and the Nationals have abandoned their constituents in favour of stoking climate wars,” Bowen said.

Littleproud would not speculate on what would happen if the Liberals decided to keep a net zero target, but said he and Ley had discussed a structured process to ensure constructive talks between the Coalition partners.

“I’ll let the Liberal Party get to [a settled] position themselves, and when they do, I will sit down constructively, as we have for over 100 years,” he said.

Former Liberal prime minister Scott Morrison negotiated for the Coalition to support net zero emissions by 2050 in 2021, and the target was legislated by the Albanese government in 2022. But both Coalition parties are revisiting the pledge after their May election defeat.

The Liberals’ review is being led by Coalition energy spokesman Dan Tehan. ”We will continue our methodical process, and we will continue the work of the working group,” Tehan said on Sunday.

At a three-hour meeting on Friday, Liberal MPs broadly united in favour of reducing emissions while abandoning the iron-clad legislated pledge to get to net zero by 2050.

As Ley says she wants to return the Liberals to the centre of the political landscape and challenge teal MPs, she and her allies are pushing for a compromise position that would retain a goal for net zero but remove the target from legislation.

A root-and-branch special commission of inquiry into the Liberal Party, which will go further than a normal election review, was also sanctioned by the party’s federal executive last Friday.

The probe will look into the party’s federated model and state division structure and will have a particular focus on how to select more women candidates and connect with multicultural communities.

It will be led by Senator James McGrath and have input from former NSW premier Mike Baird, former Tasmanian premier Will Hodgman, former federal MPs and a group of female party officials and activists including Caroline Inge, Caroline Di Russo, Sascha Meldrum, Jane Buncle, Fiona Cunningham and Danielle Young.

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