Instead of seeing the council's $30,000 contribution go towards insulating homes in the district, councillors this week said it appeared the lion's share was helping to pay for the installation of heat pumps and log burners in Milton.
Monitoring shows Milton regularly breaches air quality thresholds.
That scheme and the Clean Heat Clean Air programme are both administered by the Otago Regional Council.
The Clutha council received an annual update on the programme and its work in the province, but some councillors were disappointed to learn the Milton area was the only one in its patch to see improvements.
The programme has targeted those areas in the regional council's "Airshed 1" zone which have some of the province's worst air quality results.
Arrowtown, Alexandra and Milton are in that group.
This means home owners in those areas will get the first chance to improve their heating and insulation.
But Cr Jeff Seymour said that tactic was "a sneaky way" of the regional council using wider money to help reduce its own air quality issues.
He believed the Clutha council money was given "in good faith" to be used to help make homes warmer through underfloor, wall and ceiling insulation, and not by removing dirty fires and replacing them with clean heating appliances in those towns that regularly exceeded acceptable air quality thresholds.
"I thought this money was going to help warm the homes of people on low incomes, not help fix a regional council problem," Cr Seymour said.
He and other councillors said a strong message needed to be taken to the regional council, expressing the council's displeasure at such a move.
Otago councils will hold a regular triennial meeting this coming week.
Clutha chief executive Charles Hakkaart said he would raise the council's concerns then.
