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The full U.S. Court of Appeals for the District of Columbia Circuit ruled Tuesday that the Trump-era EPA likely acted improperly in terminating grants tied to a Biden administration program intended to finance small clean-energy projects, a decision that could restore funding to nonprofit awardees — at least for the moment. The court stayed its mandate for several days, giving the agency time to seek review by the Supreme Court, a pause that leaves months of projects and jobs in uncertainty.
The dispute centers on the federal Greenhouse Gas Reduction Fund, a $20 billion program created by the 2022 Inflation Reduction Act to seed loans and investments in community-scale clean energy, energy-efficiency upgrades and low-emission transportation. The D.C. Circuit’s en banc panel, divided 6–4, concluded a lower court was likely correct that the EPA exceeded its authority by canceling grants and attempting to claw back money already placed for program use.
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EPA Administrator Lee Zeldin froze funds that had been deposited in a Citibank account for the program and terminated grants after alleging mismanagement and potential fraud in how the awardees planned to operate the green bank. The nonprofits that were selected to run the program sued, arguing the agency lacked legal justification to end the grants and that Congress had authorized the money.
“There remains no legal basis for terminating our grant award and clawing back funds that were already disbursed,” the lead plaintiff organization said after the ruling, rejecting the agency’s allegations.
What the court decided and what happens next
Six judges found the EPA likely violated the statute that created the fund when it ended the grants over policy concerns rather than proven legal defects. One of those judges, while agreeing the cancellations were improper, warned that Congress’s later repeal of portions of the program complicates the question of future access to funding.
The four dissenting judges sided with the EPA, concluding that after Congress’s subsequent spending changes the agency probably had authority to cancel the awards. Because the court temporarily stayed its order, the nonprofit groups will not receive immediate access to the frozen cash while the EPA considers asking the Supreme Court to intervene.
- Short-term: Awardees remain in legal limbo while frozen funds are not yet released.
- Mid-term: If the Supreme Court declines review, grants could be reinstated; if it takes the case, the legal battle could extend for months.
- Policy impact: The ruling restricts an agency’s ability to terminate congressionally authorized grant awards on policy grounds without stronger legal justification.
- Project stakes: Community-level clean-energy projects and contractors face funding uncertainty, potentially delaying installations and hiring.
Background and legal thread
The Greenhouse Gas Reduction Fund was a central piece of the Biden administration’s effort to accelerate clean-energy deployment at the local level. The program sought to channel federal capital through nonprofits and community lenders to support smaller, decentralized projects that private financiers often overlook.
Last year, Congress’s Republicans passed a tax and spending measure that repealed parts of the law establishing the fund and rescinded money that had not yet been obligated. That legislative reversal is a key legal wrinkle: several judges in the case acknowledged it affects whether and how the nonprofits can ultimately access funds.
At the trial level, U.S. District Judge Tanya Chutkan found the government failed to substantiate claims of fraud and that it shifted to broader oversight concerns, concluding the executive branch could not simply flout statutory requirements and void contracts. Her order to restore some access to the money was paused during appeal.
The EPA has argued this is a typical contract dispute and that courts should not force the agency to maintain grants where it believes it has authority to end them; the agency says neither the Constitution nor statute compels it to continue funding these particular awardees.
Why this matters now
With clean-energy deployment increasingly pushed toward local and community projects, legal control over how federal seed capital is allocated shapes the speed and scale of those efforts. The court’s decision, even temporarily, underscores limits on an administration’s ability to unwind congressionally authorized programs on policy grounds and signals that agencies must meet a higher legal bar if they want to terminate awards.
For communities and small contractors counting on these grants, the ruling provides a possible pathway to funding — but not a guaranteed one. The coming days will determine whether the issue reaches the Supreme Court and, ultimately, how the federal government balances executive discretion, congressional intent and the practical needs of on-the-ground climate work.
