Court hands a loss to groups seeking billions in frozen climate funds

Lee Zeldin, the EPA administrator, during an event at the White House in Washington, April 8, 2025. Zeldin said erasing regulations would produce jobs and lower electricity costs. He called efforts to fight climate change “a cult.” (Eric Lee/The New York Times)

By CLAIRE BROWN

An appeals court earlier this week ruled against several nonprofit groups that had $16 billion in climate grants frozen this year by the Trump administration.

In a 2-1 ruling, the U.S. Court of Appeals for the District of Columbia Circuit found that it did not have jurisdiction in the case and that the Trump administration acted legally in its attempts to claw back the funds, dashing the environmental groups’ hopes of immediately accessing money they were awarded more than a year ago.

“While some grantees may be forced to shutter their operations during the litigation, their harms do not outweigh the interests of the government and the public in the proper stewardship of billions of taxpayer dollars,” the court wrote in the majority opinion.

As part of President Joe Biden’s signature climate law, the Environmental Protection Agency last year awarded eight nonprofit groups a total of $20 billion in climate and clean energy grants for such things as financing solar installations and retrofitting buildings for energy efficiency.

But in February the money was frozen at the Trump administration’s request after Lee Zeldin, the EPA administrator, suggested that the grants were vulnerable to fraud. A lengthy legal battle ensued.

At stake are billions in grant dollars, a total that amounts to roughly double the EPA’s annual budget. Legal experts say the case is testing the limits of the Trump administration’s ability to claw back federal money that has already been committed.

Beth Bafford, CEO of Climate United, an organization that was awarded nearly $7 billion in grants, said the decision was not the end of the road. “While we are disappointed by the panel’s decision,” she said, “we stand firm on the merits of our case. The EPA unlawfully froze and terminated funds that were legally obligated and disbursed.”

The funds were made available through the 2022 Inflation Reduction Act and the grants were legally committed before the November election. The grant dollars were deposited into recipients’ accounts at Citibank, which agreed to act as an intermediary between the government and the grant recipients.

Not long after entering office, Zeldin began calling for the return of the money, suggesting, without providing evidence, that the grants were vulnerable to waste, fraud and abuse.

Zeldin cited a hidden-camera video made public by the right-wing group Project Veritas in which a Biden-era EPA staff member compared the outgoing administration’s efforts to allocate money in its final months to tossing gold bars off the Titanic. In public comments, Zeldin began referring to the grants as “gold bars.”

Citibank froze the recipients’ bank accounts at the government’s request, and several of the grant recipients sued the EPA and Citibank for access to the funds in March.

The Justice Department and the EPA’s acting inspector general opened investigations into the grants, but so far the agency has not provided evidence to substantiate Zeldin’s claims. The government could legally recoup the money if it found evidence of fraud.

In court, the EPA has offered a different legal argument. It has said it can cancel the grants and reclaim the funding because its priorities have changed.

“It’s money that’s gone all the way through the fiscal process and is being pulled back, and that’s really not something administrations have done in the past,” said David Super, a law professor at Georgetown University.

On Tuesday, the court determined that the case should be heard in the Court of Federal Claims, which would decide whether the nonprofit groups are owed any money by the government. The decision vacated a previous District Court ruling that would have temporarily given the grant recipients access to some of their funds.

The two judges who made up the majority vote, Neomi Rao and Gregory Katsas, both worked in the first Trump administration and were appointed to the bench by President Donald Trump.

“It’s fantastic to see reason prevail in the court system,” Brigit Hirsch, an EPA spokesperson, said. “The gold bar recipients were wrong about jurisdiction all along and wrong to act so entitled to these precious public funds that belong to hardworking American taxpayers.”

In a dissenting opinion, Judge Nina Pillard, an Obama appointee, strongly objected to the decision. “The majority allows the government to seize plaintiffs’ money based on spurious and pretextual allegations and to permanently gut implementation of major congressional legislation.”

The grants in question were part of the Greenhouse Gas Reduction Fund, sometimes known by the shorthand “green bank” funding. The eight selected nonprofit groups were expected to act as financing hubs, sending much of the federal money to smaller community banks and other lenders. The grants were intended to finance low-interest loans and investments for such projects as solar installations and home-efficiency upgrades.

Many of the nonprofit organizations hired new staff members in anticipation of the influx of funding. Some have laid off or furloughed employees in the months since the money has been frozen.

Green banks are typically funded with government resources at first, which can “effectively create the market,” meaning the government funding is used for an initial round of loans, Kenneth Gillingham, economics professor at Yale University, said. The proceeds from those loans are then used to fund more projects, creating a self-replenishing pool of money.

The plaintiffs have said they will fight the decision. That could include asking for the case to be reheard by the full appeals court or appealing to the Supreme Court, Super said.