By Jonathan Stempel
Aug 4 (Reuters) - A federal appeals court on Tuesday said the U.S. Environmental Protection Agency cannot claw back about $20 billion of clean energy grants from several nonprofit groups, handing a defeat to the Trump administration.
The decision by a divided U.S. Court of Appeals in Washington, D.C. restored an April 2025 injunction against EPA Administrator Lee Zeldin's decision to terminate the grants, which had been awarded during the Biden administration with a goal of reducing
greenhouse gas emissions.
Funds won't be distributed immediately to nonprofits such as the Climate United Fund, the Coalition for Green Capital and various U.S. state-sponsored entities, to give the EPA time to appeal to the U.S. Supreme Court.
The EPA said it is reviewing its next steps.
Climate United, which claimed it was owed $7 billion, said that despite "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."
The Coalition for Green Capital said it looked forward to supporting expanded investment in affordable energy.
Tuesday's decision by a 10-judge panel reversed a ruling last September by a divided three-judge panel of the same appeals court, which cited the public interest in letting the Trump administration "properly and prudently" manage billions of taxpayer dollars.
ZELDIN WARNED OF POSSIBLE FRAUD, WASTE
The $20 billion was awarded to eight so-called National Clean Investment Fund and Clean Communities Investment Accelerator entities to fund loans that could be used for renewable energy products, including in communities that have lacked access to green financing.
Funds came from the Greenhouse Gas Reduction Fund, a $27 billion program established in 2022 by Congress in former Democratic President Joe Biden's Inflation Reduction Act. No Republicans voted for that law.
Zeldin sought to freeze the grants in March 2025, saying they did not align with EPA priorities and might be tainted by fraud, waste and abuse.
"The days of throwing gold bars off the Titanic are over," Zeldin said, in a quotation about the fund on the EPA website.
U.S. District Judge Tanya Chutkan's injunction required the disbursement of the disputed funds by Citibank, but was put on hold while the EPA appealed.
NO CLAWBACK BASED ON POLICY DISAGREEMENT
Last September, the appeals court sided with the agency, voting 2-1 that the nonprofits should have sued in the Court of Federal Claims, which hears monetary claims against the government.
In Tuesday's decision, the injunction was upheld by an equally divided 10-judge panel.
Six judges said that the EPA's attempt to terminate the grants and claw back funds "based solely on a policy disagreement" likely violated the Inflation Reduction Act, and the EPA provided no assurance it would leave the funds alone if the injunction were lifted.
The other four judges would have vacated the provision governing the grants. They cited Congress' passage last year of Republican President Donald Trump's One Big Beautiful Bill Act, which repealed the section of the 2022 law creating the grant program.
(Reporting by Jonathan Stempel in New York; Editing by Aurora Ellis)
