D.C. Circuit says EPA improperly terminated billions in climate grants

A divided federal appeals court ruled Aug. 4 that the Trump administration was wrong to terminate major climate grants, temporarily protecting recipients as the government considers whether to seek further review.

The en banc U.S. Court of Appeals for the District of Columbia Circuit ruled 6-4 that the Environmental Protection Agency likely violated the 2022 law when it ended the grants and sought to recover money that had already been distributed. The decision is a significant setback for the administration’s effort to reverse climate-financing awards made under the Inflation Reduction Act.

What the court decided

Six of the court’s 10 participating judges agreed with the lower court’s conclusion that EPA likely acted unlawfully in terminating the awards and pursuing clawbacks of disbursed funds. The ruling sent the challenge back toward the lower court and revived legal protections for organizations that received grants.

The decision temporarily limits the administration’s ability to carry out the terminations and clawbacks while the case continues. It does not permanently restore every grant, resolve the status of every dollar already distributed or determine the future of each project connected to the program.

The longer-term effect on recipients and projects will depend on subsequent court orders and further litigation. The administration was considering whether to ask the Supreme Court to intervene, but the court’s ruling did not itself settle that next step.

A national climate-financing program

The case centers on the Greenhouse Gas Reduction Fund, a national climate-financing program authorized through the Inflation Reduction Act. The fund includes approximately $27 billion for clean-energy and climate projects.

That scale makes the dispute larger than a disagreement over individual grants. The ruling affects a federal program designed to direct billions of dollars toward climate-related financing and constrains an effort to dismantle or reverse commitments made after Congress authorized the money.

The litigation also involves nearly $3 billion in Environmental and Climate Justice grants, according to E&E News. Those grants are part of the broader legal fight over climate awards made during the Biden administration.

EPA allegations and a recipient’s response

EPA has presented the grant terminations as justified by allegations of mismanagement and potential fraud involving grant administrators. Those allegations remain disputed and were not established as findings by the appeals court’s ruling.

Climate United Fund, one of the affected recipients, said it was owed about $7 billion and rejected the administration’s accusations. EPA lists Climate United’s award at approximately $6.97 billion.

The nearly matching figures illustrate the size of the stakes for a single recipient, but they do not resolve the parties’ disagreement over how much money was owed, how the award should be treated or whether the administration’s allegations justified termination. The appeals court’s decision addressed the legality of EPA’s action at this stage of the litigation rather than issuing a final accounting for every recipient.

What happens next

The case now moves back toward the lower court, where the practical effects of the appeals court’s ruling will be addressed. Further orders will help determine how the protections apply to grant recipients and how the government’s efforts to terminate awards or recover disbursed funds proceed.

The administration may also pursue Supreme Court review. Until the next court actions, the ruling preserves legal protection for organizations involved in the program while the broader fight over the grants continues.

For recipients, the immediate consequence is protection against the administration proceeding as though the awards had been lawfully terminated. For the government, the 6-4 decision narrows its effort to undo climate-financing commitments made under the Inflation Reduction Act. The ultimate status of disbursed funds and individual projects remains tied to the next stages of the litigation.

Sources

• Divided federal appeals court says Trump administration was wrong to terminate climate funds, Associated Press
• Greenhouse Gas Reduction Fund, U.S. Environmental Protection Agency
• DC Circuit revives EPA climate grants case ahead of bigger funding brawl, E&E News

Look for updates to this story

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