The Kelantan government did not ask any company to collect funds for the state's carbon trading project, said Menteri Besar Ahmad Yakob.

"There are allegations on social media that the state government is illegally collecting money for the programme.

"The state government stresses that it had never ordered or requested Climate Protector Sdn Bhd or any other company to collect money for the carbon trading project," he said in a statement today.

He urged those who have made such payments to lodge police reports.

Ahmad said that the state government had signed a deal with Climate Protector on Jan 9 to initiate a carbon trading programme, which he described as an incentive mechanism to encourage developing countries to reduce greenhouse gas production by preserving their forests.

He said that preserving forests would help absorb greenhouse gases and ensure environmental stability, secure clean water sources and preserve biological diversity.

"This programme will, indirectly, provide revenue for Kelantan's development," Ahmad said.

The Kelantan government, he added, will spend two years conducting scientific research on the "carbon stock" in the state's forest.

Ahmad said his government will also seek advice from financial institutions on the viability of the project, other countries with experience in similar projects, and the natural resources and environment minister.

Former Kelantan cabinet member Husam Musa had questioned whether Ahmad's administration would take action following Bank Negara's decision to red flag Climate Protector on its financial consumer alert on June 23.

The financial consumer alert is a caution list of companies which may be involved in financial services that are not authorised by the central bank.

Carbon trading, or "pollution trading", is a controversial policy in itself. The concept involved including pollution as part of the cost of production and helping businesses comply with a country's emission targets.

According to Delft-based environmental lobbying and research group Fern, studies have dismissed suggestions that carbon trading can help reduce emission levels.

The carbon market is traded much like any securities or commodities, therefore is similarly subjected to manipulation and speculation.

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