The Fight to Save Climate Grants Is Not Going Well

A federal appeals court on Tuesday cleared the way for the Trump administration to kill former President Biden’s $20 billion green bank program, which would have provided low-cost loans for solar installations, building efficiency upgrades, and other local efforts to reduce greenhouse gas emissions.

The three-judge panel overturned a lower court’s injunction temporarily requiring the Environmental Protection Agency to resume payments, and ruled that most of the plaintiffs’ claims were contract disputes and belonged in the Court of Federal Claims. If the case now moves to the Court of Federal Claims, the plaintiffs would only be able to sue for damages and any possibility of reinstating the grants would be gone. But they could also petition to appeal the decision.

Congress created the grants, known as the Greenhouse Gas Reduction Fund, as part of the Inflation Reduction Act in 2022. It authorized Biden’s EPA to award $20 billion to a handful of nonprofits that would then offer financing to individuals and organizations for emission-reduction projects, mostly geared toward low-income or otherwise disadvantaged communities. The agency fully obligated the funds last August to eight nonprofits that would “create a national financing network for clean energy and climate solutions across the country.”

Then Trump took office and ordered his agency heads to pause and review all funding for Inflation Reduction Act programs. EPA Secretary Lee Zeldin targeted the Greenhouse Gas Reduction Program for termination, making a big show of a covert recording of a former agency employee comparing Biden’s efforts to get climate money out the door after the election to “throwing gold bars off the edge” of the Titanic. Nevermind that this particular program had been fully obligated prior to the election, and recipients had already started to announce investments as early as October.

The nonprofit awardees sued the Trump administration, and the District Court for the District of Columbia issued a temporary injunction on the EPA’s grant terminations in mid-April, mandating that the funds continue to be paid out while the case proceeded. The EPA appealed that injunction, leading to today’s ruling.

In her opinion for the majority, appeals court Judge Neomi Rao, a Trump appointee, dismissed the nonprofits’ claims that the EPA’s grant terminations were arbitrary and capricious, in violation of the Administrative Procedures Act. She wrote that the dispute was “essentially contractual” and therefore did not belong in the district court to begin with. The nonprofits had also alleged that the EPA violated the constitution's separation of powers in attempting to cancel the grant agreements, as Congress had given explicit direction to the agency to award the funds by September 2024. While Judge Rao allowed that the district court had jurisdiction over this particular claim, she ruled that it was “unlikely to succeed” on the merits.

This decision, if it stands, means the case is basically over, David Super, an administrative law expert at Georgetown Law, told me. The plaintiffs could ask to have it transferred to the Court of Federal Claims if they wish to pursue monetary damages, but that’s likely a losing proposition since Judge Rao — unusually, according to Super — went on to opine that the plaintiffs would have no case there, either.

The plaintiffs could, however, ask for a rehearing by the full D.C. circuit. “Given that this is a very important case, both legally and practically, I think they would have a good chance of getting reheard,” Super said.

There was one other important point in the decision. While this case has been playing out, Congress rescinded any “unobligated” funding — money that hasn’t yet been spent or contracted out — from the Greenhouse Gas Reduction Fund as part of Trump’s tax and spending law. The Congressional Budget Office estimated that the remaining balance in the fund was just $19 million, essentially the cost of program administration. But the Trump administration has argued in the ongoing court case that the law rescinded the full $20 billion. Judge Rao disagreed, writing that the law “did not render this appeal moot.”

This is the latest in a series of wins for the Trump administration over the termination of grant funding. Last week, the D.C. district court dismissed a challenge brought by nonprofits over the termination of the Environmental and Climate Justice Block Grants, another Inflation Reduction Act program, on the grounds that it belonged in the Court of Federal Claims. The Supreme Court also issued a similar opinion in August regarding grant funding from the National Institutes of Health that was terminated on the grounds of a shift in agency priorities.

The evaporation of $20 billion in clean energy funding is no small loss, but Super said the consequences could also be much more systemic, threatening the viability of federal grantmaking as a tool to stimulate private capital. “If these commitments are utterly unenforceable, then no one's going to do business with the federal government,” he said.