In a speech to the Melbourne Economic Forum on Wednesday, the former chair of the ACCC said the "buy local" push and support for local industry could saddle the nation with high-cost solar panels and wind farms.
Mr Sims said any government support would need to be given to areas where Australia had a comparative advantage.
"How can we have low-cost renewable energy if we are saddled with high-cost solar panels, wind farms and electrolysers through a 'buy local' imperative?" he said.
"We have the 'made in Australia' group. The problem here is that it is unclear what this group seeks.
"Make everything we need, import nothing? What is the framework in this slogan for deciding what Australia does, and does not, make in Australia?"
Rod Sims says Australia needs a framework to transition to clean energy and local manufacturing. (Lukas Coch/AAP PHOTOS)
Mr Sims, the chair of a body helping the nation capitalise on the opportunities presented by the clean energy transition, said any government assistance should be targeted at "superpower industries" where Australia has the advantage, citing green iron as an example.
He said there should be "qualification rules" for financial help.
Mr Sims said without a clear framework Australia will take a series of ad hoc measures that will invite rent seeking by businesses in addition to lowering productivity.
"The government's current rhetoric around 'made in Australia' suggests there is a focus on projects relevant to the net zero transition,'' he said.
"But again, what does this suggest we do? Is it 'any green project deserves taxpayer support'?"
Mr Sims said the world needed Australia to make many green products as the nation had more low cost renewable energy resources than it needed.
But Japan, Korea, most of Europe and China did not have sufficient renewable energy resources to make all the electricity they needed.
The Albanese government this month announced its Future Made in Australia policy, which would provide subsidies to boost manufacturing and green energy technology.
Labor has flagged new projects will be funded in the federal budget, to be handed down next month.
"If the government ... is targeting producing goods in which Australia now has a comparative advantage in the net zero world ... the government must be applauded," Mr Sims said.
"We will wait and see on May 14, budget night, which group they are in."
