A divided federal appeals court on Tuesday ruled that the Trump administration improperly terminated $20 billion in clean energy grants allocated under the Biden-era Greenhouse Gas Reduction Fund, a decision that temporarily halts the Environmental Protection Agency’s (EPA) attempt to freeze the funds.
The U.S. Court of Appeals for the District of Columbia issued the ruling in response to a lawsuit filed by three nonprofit organizations—Climate United Fund, Coalition for Green Capital, and Power Forward Communities—which had received the grants to administer clean energy loans and investments. The court’s decision reinstates a preliminary injunction from April 2025 that had blocked the EPA from suspending the funds, pending further legal review.
The grants, totaling $20 billion, were authorized by Congress through the Inflation Reduction Act and were designed to support small-scale clean energy projects, energy-efficient buildings, and transportation initiatives. The EPA, under Administrator Lee Zeldin, had frozen the funds in a Citibank account and moved to terminate the grants, alleging potential mismanagement and fraud by the grantees. The EPA did not immediately respond to requests for comment on the ruling.
Court Ruling and Immediate Impact
The appeals court’s decision came in a 6-4 split, with six judges agreeing that the EPA likely violated federal law by terminating the grants. The ruling does not immediately release the funds to the nonprofits, as the court has temporarily paused the decision to allow the EPA up to several days to file an appeal with the U.S. Supreme Court. If the Supreme Court declines to hear the case or upholds the appeals court’s ruling, the nonprofits would regain access to the funds.
The nonprofits welcomed the decision, with Climate United Fund stating in a release that the EPA’s actions lacked legal basis. "Despite efforts to harm the awardees with false allegations and misinformation, there remains no legal basis for terminating our grant award and clawing back funds that were already disbursed in our bank accounts," the organization said.
Background and Legal Dispute
The Greenhouse Gas Reduction Fund, often referred to as a "green bank," was established to provide low-interest loans and investments to accelerate the transition to clean energy. The funds were distributed to eight nonprofit organizations, including the three that filed the lawsuit, to administer locally focused energy projects.
In September 2024, a three-judge panel of the same appeals court had initially ruled in favor of the EPA, asserting that the agency had broad authority to cancel grants without judicial review. However, the full appeals court agreed to rehear the case, a rare procedural move reserved for significant legal questions. The full court’s reversal on Tuesday underscores the legal complexity and political stakes surrounding the fund’s administration.
EPA Administrator Zeldin had previously criticized the fund, calling the disbursement process reckless in a video where he referenced a former EPA employee’s remark that officials were "throwing like gold bars off the edge" of a metaphorical ship. The grantees denied any wrongdoing, arguing that the EPA’s actions violated constitutional separation-of-powers principles by refusing to spend congressionally authorized funds.
Broader Implications
The ruling represents an early setback for the Trump administration’s efforts to dismantle key components of President Biden’s climate agenda. The Greenhouse Gas Reduction Fund was a central pillar of Biden’s Inflation Reduction Act, aimed at reducing greenhouse gas emissions by 2030. The case has drawn attention to the legal boundaries of executive authority in managing congressionally allocated funds, particularly in politically contentious policy areas.
Legal experts note that the appeals court’s decision does not resolve the underlying disputes over the EPA’s authority or the grantees’ management of the funds. Instead, it preserves the status quo until higher courts weigh in. The Supreme Court’s potential involvement could further delay or definitively resolve the matter, depending on whether it grants review.
For now, the nonprofits and their partners in the clean energy sector remain in a holding pattern, awaiting the outcome of the EPA’s next steps. The case highlights the ongoing tensions between executive branch actions and congressional mandates in U.S. environmental policy.