WASHINGTON, D.C. — The U.S. Court of Appeals for the District of Columbia ruled on August 4, 2026, that the Trump administration improperly terminated billions of dollars in funds for clean energy projects. Six of 10 judges on the full appeals court agreed that the Environmental Protection Agency likely violated the law by terminating grants and attempting to claw back funds based on a policy disagreement.

The court's decision will be put on hold for several days to allow the Environmental Protection Agency time to ask the Supreme Court to intervene. Climate United Fund and other nonprofits will not have immediate access to their funds due to the stay on the decision.

The Greenhouse Gas Reduction Fund is a $20 billion congressionally authorized program that provides money to nonprofits for loans and investments in small energy projects, energy-efficient buildings, and transportation. The Greenhouse Gas Reduction Fund was created by the Inflation Reduction Act.

President Trump’s tax and spending bill repealed part of the law establishing the Greenhouse Gas Reduction Fund and rescinded money that had not already been obligated to recipients. EPA Administrator Lee Zeldin accused Climate United Fund and other nonprofits of mismanagement and potential fraud.

Zeldin froze billions of dollars that had been placed in a Citibank account for the program and terminated the grants. Climate United Fund and other groups sued the Trump administration, arguing it 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 Fund said in a statement. A lawyer for the nonprofits argued that the agency had already allocated the money by placing it in a Citibank account for the program’s use.

Federal officials argue there is no law or provision in the Constitution that compels the EPA to make these grants to these groups. The agency argued that the nonprofits are making constitutional and statutory arguments that do not apply in a simple contract dispute and that the matter should be heard by a different court.

In September 2025, a divided three-judge panel of the U.S. Court of Appeals for the District of Columbia overturned a lower court ruling and stated the Trump administration had broad power to cancel grants without facing charges of illegality in federal court. The full appeals court agreed to revisit the September 2025 panel decision, a rare occurrence reserved for the most important cases.

U.S. District Judge Tanya Chutkan ruled last year that the government cannot violate the law by terminating contracts and that the groups should have access to some of their frozen money. Judge Tanya Chutkan stated that when the federal government was asked for evidence of fraud, the agency did not provide it and shifted its position to general concerns about EPA oversight.

Zeldin early last year that he suspected the green bank "was a clear-cut case of waste and abuse" that "in my opinion, is criminal." This ruling adds to a series of legal challenges involving the administration, including cases where PureSource News previously reported that the Court Blocks Trump's Asylum Suspension Executive Order and that Judge Declines to Block Trump Voting Order.

The dispute centers on the executive branch's authority to withhold congressionally appropriated funds, a conflict that has drawn repeated judicial scrutiny. The Greenhouse Gas Reduction Fund represents a federal investment in climate infrastructure, and its termination affects nonprofit organizations tasked with distributing loans for energy efficiency and transportation projects.

The full en banc review by the D.C. Circuit shows the legal complexity of the case, reversing an earlier panel decision that had favored the administration. The outcome may influence how future administrations manage discretionary spending and contractual obligations established under prior legislative acts, such as the Inflation Reduction Act.

Why It Matters

This ruling addresses the executive branch's authority to withhold congressionally appropriated funds, a conflict that has drawn repeated judicial scrutiny. The decision reverses an earlier panel finding that granted the administration broad power to cancel grants, showing the legal complexity surrounding the $20 billion Greenhouse Gas Reduction Fund. Nonprofits tasked with distributing loans for energy efficiency and transportation projects remain unable to access frozen capital while the stay allows for potential Supreme Court intervention.