A federal appeals court on Tuesday stopped the Trump administration from taking back $20 billion in climate funding, ruling that the Environmental Protection Agency likely broke the law when it tried to cancel grants awarded under the Inflation Reduction Act. The U.S. Court of Appeals for the District of Columbia Circuit issued a three-page unsigned opinion overturning an earlier panel decision, finding that the EPA violated federal statute when it attempted to terminate and reclaim Greenhouse Gas Reduction Fund grants given to Climate United and other nonprofit organizations. The court's majority said the agency acted "based solely on a policy disagreement" with the law passed by Congress.
Six of the court's 10 judges supported a preliminary injunction that blocks the EPA from canceling the grant program and recovering $6.97 billion already sent to Climate United. Congress originally authorized $19.97 billion through the IRA in 2022 to help recipients—including municipal governments—reach climate, clean energy, infrastructure, and equity targets, according to a February 9 amicus brief from the National League of Cities and the U.S. Conference of Mayors. The grants were funding projects nationwide that support domestic clean energy development, construct healthy and affordable housing, speed up American-made electric vehicle manufacturing, and lower utility bills for working Americans, Climate United stated in a March 8 lawsuit filed after the EPA froze the money. Four judges dissented in part, arguing that a portion of the preliminary injunction became unnecessary after Congress repealed unspent EPA IRA funding in last year's One Big Beautiful Bill Act.
EPA Administrator Lee Zeldin terminated GGRF funding to eight National Clean Investment Fund and Clean Communities Investment Accelerator entities last year, with an EPA spokesperson citing "serious concerns regarding self-dealing and conflicts of interest, unqualified recipients, and reduced government oversight" in a December statement. Climate United pushed back forcefully in response to Tuesday's ruling, saying in an email that "EPA took actions to unlawfully freeze and dismantle the National Clean Investment Fund grant program." The nonprofit added that despite attempts to damage awardees with false allegations and misinformation, no legal basis exists for terminating their grant or clawing back funds already deposited in their bank accounts. The judges noted the EPA hasn't indicated it would stop trying to repeal the funds if the injunction were lifted.
The court's decision leaves significant uncertainty about what happens next. The appeals court stated it's evenly split on whether temporary restrictions on the EPA should remain in place based on the remaining legal arguments before them, essentially punting the question to future proceedings. Municipal governments have already suffered harm and face further risk because they planned projects and made budget decisions based on the grants, the cities' amicus brief states. An EPA spokesperson said in an August 4 email that the agency is reviewing Tuesday's judgment and considering next steps. The ruling protects billions in funding for local clean energy and housing projects while leaving the door open for continued legal battles over the EPA's authority to reverse congressionally approved climate investments.