Appeals court rules Trump EPA wrongly canceled $20B in climate funds

A federal appeals court ruled Tuesday that the Trump administration’s Environmental Protection Agency (EPA) did not have the authority to terminate and claw back climate funding that had already been disbursed to nonprofit groups. Eight nonprofit organizations had sued to regain access to funds that were frozen in February 2025, after EPA Administrator Lee Zeldin, along with the FBI and the Treasury Department, ordered Citibank to freeze their accounts.

The ruling gives the groups access to their funding while the EPA decides whether to appeal to the U.S. Supreme Court; it has seven days to do so. Many of the nonprofits, though, had already made significant cuts while their accounts were frozen. The judgment upholds an injunction that blocks the EPA from clawing back money already disbursed into the nonprofits’ bank accounts, with six of the ten judges on the U.S. Circuit Court of Appeals for the District of Columbia Circuit siding with the nonprofits.

The judges found that the EPA was trying to claw back the funding “solely on a policy disagreement,” unlawfully withholding money that Congress had appropriated under the Inflation Reduction Act (IRA) to create the Greenhouse Gas Reduction Fund, a $20 billion program meant to spur clean-energy development. Much of that funding would have gone toward debt facilities to help businesses and communities move away from fossil fuels — loans the ruling noted have delinquency rates similar to those of commercial lenders. The Trump EPA had argued it had authority to claw back the money because the One Big Beautiful Bill Act (OBBBA) repealed the part of the IRA that created the fund, but the judges said that once funds were obligated and disbursed, the OBBBA gave the government no grounds to take the money back: a new law cannot retroactively undo money the government already sent out.

The decision may still come too late for some recipients: Climate United’s CEO left in March and hasn’t been replaced, and Power Forward Communities is down to two employees, The New York Times reported; other grantees have had to lay off workers as well.

Why it matters

The ruling blocks the EPA from clawing back funds it had already paid out, but the extended freeze has already forced staffing and program cuts at several of the affected nonprofits — costs the funding’s return won’t undo.