Federal court blocks EPA's attempt to cancel $20bn clean energy grant program

A federal appeals court in Washington dealt a significant setback to the Trump administration's effort to dismantle Biden-era climate spending on Tuesday, ruling that the Environmental Protection Agency likely broke the law when it froze roughly $20 billion in clean energy grants. The decision by the full US Court of Appeals for the District of Columbia reversed its own three-judge panel from September, a rare move that signals the court took the case seriously. But the money will not flow immediately. The ruling has been temporarily suspended to allow the EPA time to petition the Supreme Court for intervention.

At stake is the Greenhouse Gas Reduction Fund, a program Congress created through the 2022 Inflation Reduction Act. The fund operates as a kind of green bank, channeling federal money to nonprofit organizations that then distribute loans and investments to smaller energy projects, building efficiency upgrades, and clean infrastructure. Eight organizations received the initial grants, including the Climate United Fund and the Coalition for Green Capital, and they were responsible for deciding how to allocate the money to other nonprofits and entities.

EPA Administrator Lee Zeldin has made dismantling the program a priority. In a video posted to social media last February, he characterized the fund as wasteful government spending, describing it as roughly $20 billion in tax dollars "parked at an outside financial institution" by the Biden EPA. He accused the recipient organizations of irresponsible distribution and said the administration would no longer shovel money to what he called far-left activist groups under the banner of environmental justice. The following month, the EPA froze the billions held at Citibank that were supposed to be distributed as grants.

The eight recipient organizations pushed back hard. They denied any fraud or mismanagement and sued, arguing that the administration was illegally withholding money that Congress had already approved and that the real motive was ideological opposition to climate spending, not evidence of wrongdoing. The case turned on a fundamental question: whether an executive agency can simply decide to cancel congressionally authorized spending because it disagrees with the program's goals.

The appeals court majority found that the EPA's attempt to terminate the grants and recover the money "based solely on a policy disagreement" likely violated the Inflation Reduction Act. The judges also noted that the agency had not provided assurance it would leave the funds untouched if the injunction were lifted, suggesting a lack of good faith. The ruling restored an earlier order from US District Judge Tanya Chutkan, who had found the EPA failed to justify canceling the grants and warned that the administration was overstepping Congress's constitutional power to decide how federal money gets spent.

This case is one of several legal challenges to Trump's broader campaign to reverse his predecessor's climate agenda. Since returning to office, the administration has rolled back environmental regulations, expanded fossil fuel production, and sought to unwind clean energy initiatives, arguing they impose unnecessary costs on businesses and consumers. The courts are now becoming a venue where that reversal is being contested, and this decision suggests at least some judges are skeptical of the administration's legal theory. What happens next depends on whether the Supreme Court agrees to hear the EPA's appeal.