The 5 Big Legal Questions Holding Up Billions in Climate Funding

Trump started his second term in office with a sweeping federal funding freeze that invited a spate of lawsuits all raising the same general question: Can the president refuse to spend the money Congress appropriates?

When it came to climate programs, the funds at stake included billions of dollars lawmakers had set aside for clean energy, green banks, scientific research, technological development, conservation, and environmental justice projects in the Inflation Reduction Act and the 2021 bipartisan infrastructure law.

The legal landscape has evolved significantly since this all started. Although several courts issued injunctions on the funding freeze almost immediately after it went into effect, the administration quickly moved on to terminating grants instead. Also, a lot of the IRA money that was initially caught up in the freeze is now gone, rescinded by Congress in the One Big Beautiful Bill Act of 2025.

Still, a significant chunk — more than $90 billion — was formally awarded before OBBBA took effect and remains in jeopardy. A few recent court decisions, however, suggest that some grantees may be able to see their projects through.

Here’s a guide to the current state of play.

What kind of lawsuits have been filed?

There are generally four categories of lawsuits over the climate grants.

First are the suits challenging the legality of Trump’s freeze on IRA and infrastructure law funding, which he laid out in his Day 1 executive order “Unleashing American Energy.” In Woonasquatucket River Watershed Council v. USDA, for example, several nonprofits allege that the administration overstepped its statutory authority and acted contrary to the laws that Congress passed when agencies froze funds. In April of last year, a district court judge put a preliminary injunction on the freeze while the case played out, and the plaintiffs started receiving money again.

Second, there are a number of suits fighting the agencies’ elimination of specific programs. In Harris County v. EPA, to name one, the Texas county is suing the Environmental Protection Agency for terminating Solar for All, a $7 billion IRA program designed to fund solar projects in low-income communities. Harris County argues that the decision was arbitrary and capricious, violating the Administrative Procedures Act, and that it also violates the constitution’s separation of powers, which gives Congress the power of the purse.

Third, there are a few suits challenging the cancellation of individual grants. In City of Saint Paul, Minnesota v. Wright, for instance, the city and several other groups challenged the Department of Energy’s move to cancel more than 300 grants in blue states on the first day of a government shutdown last October. Each of the grants had an address on file with the government that was in a state that voted for Kamala Harris in the 2024 election. Saint Paul and the other plaintiffs argued that the cancellations violated equal protection under the Fifth Amendment.

Each of the cases I’ve described so far challenges Trump on statutory and constitutional grounds, and is playing out in district and appeals courts. The last category is notably different.

More recently, a number of grantees whose funding was terminated have filed lawsuits against the government in the Court of Federal Claims. These suits allege violations of the terms of the individual grant contracts, which lay out the specific circumstances under which the government can cancel an award. The key difference in these cases is that they can only result in monetary damages — the Court of Federal Claims cannot compel an agency to reinstate a grant, or weigh in on the president’s right to eliminate congressionally-mandated programs.

In Sublime Systems Inc. v. United States, for example, the clean cement company is claiming “billions of dollars in damages” in lost income, lost funding, and lost company value. The Energy Department canceled Sublime’s $87 million grant to build a first-of-a-kind cement plant last year, notifying the company that it no longer “effectuates the program/agency priorities” with no further explanation as to what had changed and why.

Which courts get to decide?

Perhaps the most consequential question in many of the cases is who has jurisdiction. In the district court cases, one of the government’s main arguments is that these suits are, in essence, contract disputes, and therefore belong in the Court of Federal Claims.

To date, a number of courts have weighed in on this question with mixed opinions. Most notably, the Supreme Court issued orders in two cases involving education and health grants saying that the district courts likely lacked jurisdiction to reinstate canceled grants.

These were emergency orders to provide temporary relief — a channel legal scholars refer to as the Court’s “shadow docket” — and do not carry the same legal significance as a decision on the merits of the underlying cases would. Still, some district courts have cited these orders in their judgments, concluding that allegations by grantees are contractual in nature and belong in the Court of Federal Claims. Other district courts have disregarded the Supreme Court orders and approved grantees’ requests for injunctions on the terminations. In some of those cases, however, appeals courts have later disagreed.

An important ruling on this question came in early August in the case of Climate United v. EPA. The suit involves a group of nonprofits fighting to reinstate their grants under the IRA’s $20 billion green bank program. The D.C. Circuit Court of Appeals affirmed a lower court’s preliminary injunction on the EPA’s termination of the program, cracking open the door for money to start flowing again. The appeals court’s order was short, but it notably did not raise any issue with the district court hearing the case.

The Trump administration signaled that it planned to appeal the Climate United decision to the Supreme Court. If the high court holds a full merit hearing on the case and decides it’s a contract dispute, that could not only shut down the Climate United case, but also many of the other lawsuits, and send hundreds of grantees running to the Court of Federal Claims.

How did OBBBA change things?

Many of the cases became more complicated after the passage of the One Big Beautiful Bill Act. The law explicitly rescinded “unobligated funds” from Inflation Reduction Act programs, referring to funds that hadn’t yet been formally awarded.

The plaintiffs in the grant cases argue that because their funds were obligated prior to the OBBBA, the new law shouldn’t change anything. The Trump administration, however, has argued that since it moved to terminate the grants prior to OBBBA, they were no longer technically obligated when that law passed, and therefore the lawsuits challenging the terminations are moot.

In at least one case, The Sustainability Institute v. Trump, the district court judge rejected that argument, deeming it “without merit” in a June 2026 order and ordering the EPA to pay out the funds. The lawsuit concerns the Environmental and Climate Justice Block Grants, a $2.8 million program supporting air quality monitoring, climate adaptation, and pollution reduction. The government is appealing the decision.

In other lawsuits over grants from the Greenhouse Gas Reduction Fund, the situation is even more convoluted. Congress set aside $27 billion in the IRA for grants and loans for projects that reduce emissions, and to establish green banks that would do the same — these are the programs at stake in the Climate United and Harris County cases. OBBBA did not just rescind unobligated funds from this program, it also repealed the underlying statute establishing it.

Romany Webb, the deputy director of Columbia University’s Sabin Center for Climate Change Law, told me this complicates the arguments alleging violations of the constitution. “If you’re arguing that EPA dismantled a congressionally-approved program in violation of the separation of powers, and then afterwards Congress moves to dismantle that program, can you still make that same argument?”

In early August’s Climate United ruling, the appeals court split on what it all meant. Four of the 10 judges questioned whether the injunction on the EPA’s terminations was still warranted since, per their understanding, the repeal of the program gave the agency the ability to terminate the grants without violating the IRA. One judge, while disagreeing with that read, questioned whether EPA could be ordered to reinstate the grants, since the agency no longer had any funding to administer the program.

“There’s lots of questions about the impact of the One Big Beautiful Bill Act, both in terms of the substance of the arguments, and then if those arguments are accepted, the remedy that the court can provide,” Webb said.

Can the agencies simply shift their priorities?

At least 10 cases are currently pending in the Court of Federal Claims that hinge on the question of whether a clause in the grant contracts that allows agencies to terminate an award if it “no longer effectuates the program goals or agency priorities” gives the government cover for canceling awards with no notice or explanation.

There’s actually a separate district court fight going on over this very language on constitutional grounds. A group of 22 states, led by New Jersey, is suing the government, alleging that this language, which is standard in government funding contracts, does not give the administration permission to change its priorities on a whim. They argue that it’s intended to govern situations where the grant can no longer achieve the original program goals and agency priorities, not where the agency priorities change. In early July, the court issued an order agreeing with that interpretation. The government still has time to appeal, so it’s too soon to say how this will affect the Federal Claims court cases.

Has anything been decided yet once and for all?

There is one set of cases where the plaintiffs have been undoubtedly successful. In the Saint Paul case I mentioned earlier, seven plaintiffs had been awarded grants by the Department of Energy for various kinds of projects — EV charging stations, methane mitigation, energy efficiency. The government’s lawyers freely admitted that the agency canceled these grants primarily because they were awarded to entities in blue states. The judge ruled that this did, in fact, violate the Fifth Amendment. She vacated the terminations in January.

After that win, another group of 11 grantees in the same situation — their grants were terminated as part of the same attack on blue states — filed suit in the same court, and the same judge vacated their terminations in June. The government has not appealed either decision. Since hundreds of other grantees could make the same discrimination argument, there may be more of these cases on the way.