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Environmental Law Monitor

Your Guide to Emerging Issues in Environmental Regulation and Litigation.

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• Appellate Court, Environmental Law Monitor, EPA

Appeals Court Unfreezes $20 Billion in Climate Grants

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The U.S. Court of Appeals for the D.C. Circuit recently held that the Environmental Protection Agency (EPA) likely improperly froze roughly $20 billion in clean energy grants and thus, repealed an injunction that kept the funds in place while the validity of the grants is contested in court.

By way of background, in 2024, the Greenhouse Gas Reduction Fund – a “green bank” created by the 2022 Inflation Reduction Act – awarded roughly  $20 billion to eight nonprofits with the aim of financing loans for clean energy projects. In early 2025, however, the One Big Beautiful Bill Act repealed the portion of the Inflation Reduction Act that established the bank, citing potential fraud and mismanagement. As a result, the previously awarded grants were terminated by the EPA, and the dispersed funds were frozen. Shortly thereafter, the nonprofit grantees sued, arguing, among other things, that the EPA violated the Constitution by failing to spend money authorized by Congress.

The resulting case, Climate United Fund v. Citibank, centers on whether the grant recipients challenging the terminated awards can proceed in federal court on constitutional grounds, or in the Court of Federal Claims under the Tucker Act on contractual grounds. While that jurisdictional question is still at issue in the U.S. District Court for the District of Columbia, the parties have disputed an injunction established early in the litigation that froze the grantee-litigants’ access to the contested funds.

Regarding the validity of the injunction, the U.S. Court of Appeals for the D.C. Circuit held early last week, in a 6-4 decision, that the EPA likely acted unlawfully when it terminated the clean energy grants and thus, repealed the injunction keeping the contested funds frozen. The Court’s order instructed the EPA to allow the grantees to access the funds starting this week. However, soon after the court’s decision, the EPA and the grantees reached a deal to maintain the funding freeze while the issue is appealed to the Supreme Court, thus avoiding an appeal on the Supreme Court’s emergency docket.

The Climate United Fund matter is one of many lawsuits filed in the past year challenging the EPA’s termination of Biden-era climate grants (further discussed here: EPA Facing Lawsuits Over Cuts to Solar Energy Funding after Termination of ‘Solar for All’). The pending litigation poses questions as to the limits of judicial review over federal grant funding generally, along with uncertainty as to whether previously issued climate grants will remain in effect.