The Institute of Public Affairs has blasted the Morrison government’s “big stick” in energy policy – a threat to break up energy companies in a bid to lower prices – accusing it of breaching Liberal values and endangering investment.

The IPA executive director, John Roskam, told Guardian Australia that “heavy-handed intervention” was “positively un-Liberal” and would open the door for Labor to campaign on policies bashing big businesses – which are “simply responding to the policy settings the government itself has created” to make a profit.

Roskam also warned against any form of subsidy for electricity generation including renewables subsidies, underwriting new power generation and indemnifying coal power against a possible future carbon price.

The intervention from the influential rightwing thinktank exposes divisions in the conservative side of politics on energy policy. Some, including MP Craig Kelly and former prime minister Tony Abbott, have called for an end to renewable subsidies and withdrawal from the Paris agreement, in line with demands from the IPA.

The Morrison government has indicated it wants to preserve popular solar subsidies and to stay in Paris while it pushes ahead with competition measures to lower price in the absence of a policy to reduce emissions by 2030.

Roskam said breaking up energy companies “continues the trend of targeting particular industries” as the Coalition did with the bank tax in the 2017 budget and would “further confuse Australians” about what it stands for.

“The idea that the government would determine the shape and size of the industry in this way cuts across every principle of the Liberal party,” he said. “If you want a guarantee that nobody will ever invest in Australia again, this is how you do it.”

The Coalition has promised policies to encourage new generation – including providing a floor price, contracts for difference and government loans – and has not ruled out using those measures to support new coal-fired power stations.

The energy minister, Angus Taylor, has said the government should address investors’ concerns about “political risks”, in a sign it could also indemnify coal power against future emissions reduction policies such as a carbon price. Taylor has also said there is “no plan” to change the small-scale renewable energy scheme.

Roskam said the government should “stop all subsidies to coal, wind and anything else” because “picking winners should be an anathema to the Liberal party”.

Although the IPA wants to see more coal power, Roskam said the government should “reduce the regulatory barriers to them being funded”, not keep the barriers and overcome them with subsidies.

He said he had “some sympathy” for the idea the government should “compensate coal for the disadvantage they have been put under” by support for renewables, but warned that indemnifying coal against political risk would be a “further distortion” in the market.

Roskam said the Liberal Party is “hopelessly conflicted on climate change” and “riven down the middle”. He warned the party can not appeal both to “rich people virtue-signalling because they can afford to” in the blue-ribbon seat of Wentworth who want emissions reduction, and voters who want lower power prices in Longman in Queensland, both sites of recent byelection defeats.

“Wentworth is not Australia,” Roskam said, echoing conservative commentators who have played down the byelection defeat.

The sentiment is not shared by moderate Liberal MPs who privately note the Liberals hold many seats with a base of supporters with high incomes and progressive social attitudes including Brisbane, Goldstein, Higgins, Kooyong, Warringah, Mackellar and North Sydney.

Roskam suggested the Liberal party should present a “sharp difference” with Labor by exiting the Paris agreement. “You can’t out virtue-signal the Labor party,” he said.

Despite the suggestion emissions and price reductions are incompatible, renewables are forecast to lower prices while coal subsidies would increase energy costs.

On Friday Scott Morrison told ABC’s AM that “all the information before us” is that Australia will meet its emissions reduction target of 26% by 2030, particularly due to “increased investment in renewables which is happening as a result of common sense and technology”.

The claim is contradicted by environment department figures showing emissions are rising and advice from the Energy Security Board that Australia will fall short under a business-as-usual scenario.

Morrison said the government needs to prioritise “making sure we’ve got reliable power”.

“I mean renewables are standing on their own two feet. I think that’s fantastic.”