A federal appeals court delivered a sharp rebuke to the Trump administration Tuesday, ruling that the Environmental Protection Agency lacked authority to terminate and claw back roughly $20 billion in clean-energy grants already sent to nonprofit groups. The decision restores an earlier injunction. It lets the money flow again from accounts held at Citibank while the EPA weighs an appeal to the Supreme Court.
The funds come from the Greenhouse Gas Reduction Fund. Congress created the program in the 2022 Inflation Reduction Act to accelerate lending for projects that cut emissions and benefit disadvantaged communities. Five nonprofits received the largest shares. Climate United Fund landed nearly $7 billion. Coalition for Green Capital got $5 billion. Others included Power Forward Communities, Inclusiv and Justice Climate Fund.
But. The money never really moved freely. In February 2025 the EPA directed Citibank to freeze the accounts. Months later the agency formally terminated the grants. Officials cited concerns over oversight, potential conflicts of interest and haste in the final days of the prior administration. EPA Administrator Lee Zeldin had declared on the agency website that “the days of throwing gold bars off the Titanic are over.”
Nonprofits sued. A district judge issued a preliminary injunction in April 2025 ordering the funds released. The EPA appealed. A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit sided with the government in September 2025. That panel said the recipients should pursue claims in the Court of Federal Claims and that the public interest favored letting the executive manage taxpayer dollars.
The full D.C. Circuit took the unusual step of rehearing the matter. On Tuesday six of ten judges voted to lift the stay on the injunction. The unsigned opinion concluded the EPA likely violated the Inflation Reduction Act. The agency, the court found, was attempting to claw back the funding “solely on a policy disagreement.” And that disagreement could not override a mandatory congressional appropriation for funds already disbursed.
The ruling drew from a detailed record. It included how the nonprofits had received the money in their bank accounts before the freeze. It highlighted the administration’s abrupt shift. One internal video captured an EPA employee noting that processes to prevent fraud had given way to rushing funds out before the transition. Termination letters arrived with little notice. Meetings were canceled. The nonprofits, left in limbo, slashed staff. Climate United lost its CEO. Power Forward Communities shrank to just two employees.
Recipients welcomed the news. A Climate United spokesperson said, “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.” Coalition for Green Capital expressed hope it could now support expanded investment in affordable energy. The decision, they argued, affirms that once Congress appropriates and the executive disburses, policy changes cannot retroactively snatch the money away.
Legal observers point to the One Big Beautiful Bill Act. That legislation, passed later, repealed portions of the original IRA authority. Yet the court majority held it offered no basis to reclaim funds already sent. Four judges dissented. They would have allowed the termination to stand. The split signals this fight may not end here. The EPA has seven days to seek emergency relief from the Supreme Court.
This case sits at the center of a broader contest. The Trump administration moved quickly after taking office to unwind Biden-era climate initiatives. Similar efforts targeted other IRA programs. Environmental groups and Democratic-led states have filed multiple suits. Tuesday’s outcome hands the nonprofits a significant win. It may slow the administration’s pace. It also raises fresh questions about how far an executive branch can go to redirect spending once money leaves the Treasury.
State-level green banks offer a preview of what the federal program hoped to achieve. Those entities have generated $21.8 billion in public-private investment to date with strong repayment records. Delinquency rates on the types of loans envisioned here track those of ordinary commercial lenders. The federal version was designed to scale that model. It would channel capital to communities long overlooked by traditional finance. Projects range from domestic clean-energy manufacturing to energy-efficient housing and electric-vehicle supply chains.
Critics of the original awards had warned of inadequate vetting. They pointed to the speed of the late Biden-era disbursements and potential for waste. The administration’s termination letters echoed those worries. Yet the appeals court majority found such policy objections insufficient to overcome the statutory command. Congress had spoken. The executive could not simply rewrite the terms after the fact.
The decision arrives as markets watch for signals on federal climate spending. Clean-tech investors had grown wary after the initial freezes. Some projects stalled. Others sought private capital to bridge gaps. Restoration of the funds could restart momentum. But uncertainty lingers. A Supreme Court appeal might keep the accounts frozen for months. Even if the nonprofits ultimately prevail, reputational damage and lost time cannot be clawed back.
Earlier this year the same court had pressed the EPA on its justifications during oral arguments. Judges questioned whether the agency had followed proper procedures and whether its concerns truly rose to the level of fraud or mismanagement. The final opinion reflects that skepticism. It reinforces limits on executive power when Congress has set clear spending directives.
Industry insiders have followed the litigation closely. Energy lenders, community development banks and manufacturers all stand to gain or lose depending on how the money moves. The Greenhouse Gas Reduction Fund was never a direct grant program. It was structured as a source of low-cost capital. Nonprofits would lend or invest in projects that private markets might ignore. Success hinged on getting the capital into the field quickly yet prudently.
Now the capital sits ready again. The court gave the EPA a short window to seek further review. Agency officials said they are reviewing next steps. Environmental lawyers predict the matter could reach the high court by fall. Whatever the ultimate outcome, Tuesday’s ruling underscores a recurring tension. How much latitude does a new administration have to reverse its predecessor’s spending priorities? The D.C. Circuit has drawn a line. Congress appropriates. Once disbursed, the money is harder to retrieve than many expected.
The fight over these funds reflects larger shifts in Washington. With slim majorities and ambitious agendas on both sides, climate policy has become a prime arena for legal and political combat. Each court decision recalibrates the battlefield. This one tilts it back toward the original recipients. But the story is far from over. Watch for the EPA’s next filing. The Supreme Court has shown willingness to step into executive-power disputes. Its intervention could reshape not just this $20 billion pot but the future of similar congressionally mandated programs.