A federal appeals court ruled Tuesday that the U.S. Environmental Protection Agency (EPA) cannot freeze approximately $20 billion in clean energy grants. The decision by the U.S. Court of Appeals for the D.C. Circuit restores an injunction that prevents the agency from terminating funds previously awarded to several nonprofit organizations.
The grants were originally issued during the Biden administration under the Greenhouse Gas Reduction Fund, a $27 billion program created by the 2022 Inflation Reduction Act. In March 2025, EPA Administrator Lee Zeldin sought to terminate the grants, stating the funding did not align with the agency's current priorities and could be subject to fraud, waste, and abuse.
In the Tuesday ruling, a 10-judge panel was equally divided on upholding the full injunction, but a 6-judge majority specifically upheld the provision governing the grants. The majority stated that the EPA’s attempt to claw back funds based on a "policy disagreement" likely violated the Inflation Reduction Act. The court noted that the agency provided no assurance it would preserve the funds if the legal stay were lifted.
Four dissenting judges argued the grants should be vacated because Congress passed the "One Big Beautiful Bill Act" last year, which repealed the section of the 2022 law that established the grant program. The disputed funds, which were intended for renewable energy projects in communities lacking green financing, were being held by Citibank for recipients including the Climate United Fund and the Coalition for Green Capital.
For residents in communities that have historically lacked access to green financing, the outcome of this case will dictate the availability of local renewable energy products and improvements. A person living in such a community might notice changes in the availability of financing for solar installations or energy-efficient upgrades, depending on whether these nonprofits can begin disbursing the funds as originally intended under the 2022 Inflation Reduction Act. The court's decision to restore the injunction means the EPA must currently allow the disbursement of these funds, though the agency is reviewing the decision and may seek further legal action.
The ruling sets a legal precedent regarding the executive branch's authority to "claw back" or freeze funds already obligated by a previous administration due to policy shifts. It clarifies the limits of an agency head's power to redirect congressional appropriations based on internal priorities. The next step in the process involves the EPA's potential appeal to the U.S. Supreme Court, as the agency stated it is currently reviewing the decision to determine its future legal strategy.