Divided federal appeals court says Trump administration was wrong to
terminate climate funds
[August 05, 2026]
By MICHAEL PHILLIS
WASHINGTON (AP) — A divided federal appeals court on Tuesday said the
Trump administration improperly terminated billions of dollars in funds
to boost clean energy projects, handing a win to a coalition of
nonprofits picked to run the Biden-era effort.
Climate United Fund and other nonprofits won’t have access to their
funds immediately as the decision will be put on hold for several days
giving the Environmental Protection Agency time to ask the Supreme Court
to step in.
The judgement by the full U.S. Court of Appeals for the District of
Columbia is a loss for the Trump administration in one of its earliest
efforts to dismantle President Joe Biden’s campaign to reduce
climate-warming greenhouse gases. The Greenhouse Gas Reduction Fund,
commonly referred to as a “green bank,” is a $20 billion congressionally
authorized program that provided money to nonprofits that would then
make loans and invest in small energy projects, energy-efficient
buildings and transportation.
EPA Administrator Lee Zeldin accused Climate United Fund and other
nonprofits picked to run the green bank of mismanagement and potential
fraud. He froze billions that had been placed in a Citibank account for
the program and then terminated their grants. The groups disputed any
wrongdoing and sued, arguing the Trump administration broke the law and
violated the Constitution by not spending money authorized by Congress.
“Despite efforts to harm the awardees with false allegations and
misinformation, there remains no legal basis for terminating our grant
award and clawing back funds that were already disbursed in our bank
accounts,” Climate United said in a statement.
In September, a divided three-judge panel of the same appeals court
overturned a lower court and said the Trump administration had broad
power to cancel grants without having to face charges of illegality in
federal court.
The full appeals court agreed to revisit that decision, a rare
occurrence reserved for the most important cases.
Zeldin early last year told Fox News that he suspected the green bank
“was a clear-cut case of waste and abuse” that “in my opinion, is
criminal.”
U.S. District Judge Tanya Chutkan last year said that when the federal
government was asked for evidence of fraud, the agency didn’t provide it
and shifted its position to more general concerns about the level of EPA
oversight over the program. Chutkan ruled the government can’t violate
the law and terminate the contracts and that the groups should have
access to some of their frozen money. That order was put on hold during
appeal.
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President Donald Trump, left, speaks during an event with
Environmental Protection Agency director Lee Zeldin in the Roosevelt
Room of the White House, Feb. 12, 2026, in Washington. (AP
Photo/Evan Vucci, File)
A lawyer for the nonprofits argued at the time that the agency had
already allocated the money by putting it in the Citibank account
for the program’s use.
The agency argued the nonprofits are making constitutional and
statutory arguments that don’t apply in a simple contract fight, and
that the matter should be heard by a different court that can only
award a lump sum — not force the government to keep the grants in
place. Federal officials argue there is no law or provision in the
Constitution that compels the EPA to make these grants to these
groups.
The green bank was created by the 2022 Inflation Reduction Act, a
Biden administration priority that boosted clean energy and
climate-friendly projects. President Trump’s tax and spending bill
last year, however, repealed part of the law that established the
bank and rescinded money that hadn’t already been obligated to its
recipients. That added a layer of complication to the legal case.
Six of 10 judges agreed with a lower court judge that the Trump EPA
likely violated the 2022 law when it terminated the grants and tried
to claw back funds based on a policy disagreement.
However, one of the six judges that agreed the grant terminations
were improper said Trump's bill complicated whether the clean energy
groups could access funds going forward.
The remaining four judges broadly disagreed with the majority and
sided with the EPA, saying that after Trump's tax and spend bill,
the agency likely would have authority to end the grants.
The EPA did not immediately provide comment.
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