Appeals Court Rules Trump EPA Lacked Authority to Revoke $20B in Climate Grants Already Disbursed

An appeals court ruled that the Trump administration lacked authority to claw back $20 billion in climate grants already disbursed to eight nonprofits. The EPA, FBI, and Treasury had frozen the groups' Citibank accounts in February 2025, citing the One Big Beautiful Bill Act. The court upheld an injunction blocking the clawback, restoring funding access. However, the freeze forced severe staff cuts, leaving Power Forward Communities with two employees and Climate United without a CEO.

EPA grant clawback rejected

• ▪The Environmental Protection Agency argued it had authority to claw back the funds under the One Big Beautiful Bill Act, which it claimed repealed the portion of the Inflation Reduction Act that created the program.
• ▪The U.S. Circuit Court of Appeals for the District of Columbia Circuit ruled on August 4, 2026, that the Trump administration lacked the authority to terminate and claw back $20 billion in climate grants already disbursed to nonprofits.
• ▪Six of ten judges on the U.S. Circuit Court of Appeals for the District of Columbia Circuit supported lifting the injunction, ruling that the Environmental Protection Agency attempted to claw back the funding solely on a policy disagreement.
• ▪The U.S. Circuit Court of Appeals for the District of Columbia Circuit upheld an injunction preventing the Environmental Protection Agency from recovering funds already deposited in the bank accounts of eight nonprofit groups.

Greenhouse Gas Reduction Fund

• ▪The $20 billion Greenhouse Gas Reduction Fund was created by the Inflation Reduction Act to establish debt facilities and clean energy lending operations to help businesses and communities reduce fossil fuel reliance.
• ▪The U.S. Circuit Court of Appeals for the District of Columbia Circuit noted that delinquency and late-payment rates on loans from the Greenhouse Gas Reduction Fund are similar to those of commercial lenders.

Frozen nonprofit accounts

• ▪In February 2025, Environmental Protection Agency Administrator Lee Zeldin, the FBI, and the Treasury Department ordered Citibank to freeze the bank accounts of eight climate nonprofit groups.
• ▪The August 4, 2026, appeals court ruling restores access to the frozen funds for the eight nonprofit groups while the Environmental Protection Agency decides whether to appeal to the U.S. Supreme Court.
• ▪The Environmental Protection Agency has seven days from the August 4, 2026, ruling to file an appeal with the U.S. Supreme Court.

Organizational staff cuts

• ▪Power Forward Communities was reduced to only two remaining staff members, and other affected climate nonprofits enacted layoffs, while their bank accounts were frozen by the federal government.
• ▪Climate United's chief executive officer departed in March 2026 and has not been replaced due to the financial strain of the Environmental Protection Agency account freeze.

Clean energy policy risk

• ▪The temporary freezing of the Greenhouse Gas Reduction Fund halted clean-energy projects and forced operators to make long-term organizational decisions under extreme regulatory uncertainty.
• ▪The legal battle highlights policy risk for clean-energy investors, demonstrating how government programs can be funded, frozen, and legally challenged within a short timeframe.