The U.S. Court of Appeals for the District of Columbia Circuit ruled on Tuesday to block the Trump administration's revocation of climate grants totaling $20 billion. The ruling overturned a panel's earlier decision, finding that the Environmental Protection Agency (EPA) may have violated the Inflation Reduction Act when it attempted to terminate and claw back grants awarded to Climate United and other nonprofit organizations under the Greenhouse Gas Reduction Fund.

Climate United stated in a lawsuit filed on March 8 that the grants were being used to fund "projects across the country that support domestic clean energy development, build healthy and affordable housing, accelerate American-made electric vehicle manufacturing, and save working Americans money on their bills." The lawsuit was filed after the EPA froze the funds.

In the unsigned three-page court opinion, six of ten judges supported maintaining the preliminary injunction, rejecting the EPA's attempt to terminate the grant program and claw back $6.97 billion already disbursed to Climate United "based solely on policy disagreements." The judges noted that the EPA had not shown it would refrain from further action to rescind the funds if the injunction were lifted.

In 2022, Congress authorized $19.97 billion through the Inflation Reduction Act to support beneficiaries, including local governments, in achieving climate, clean energy, infrastructure, and equity goals. The National League of Cities and the U.S. Conference of Mayors stated in an amicus brief filed on February 9 that "local governments have already suffered losses and still face the risk of further losses" because they made project planning and budget decisions based on these grants.

Last year, Congress rescinded unspent Inflation Reduction Act funds in the One Big Beautiful Bill Act. EPA Administrator Lee Zeldin terminated Greenhouse Gas Reduction Fund grants awarded to eight national clean investment funds and clean community investment accelerator entities, with an EPA spokesperson stating in a December email statement to Smart Cities Dive that "serious concerns arose regarding self-dealing and conflicts of interest, recipient ineligibility, and reduced government oversight."

Four judges on the D.C. Circuit Court of Appeals held that parts of the preliminary injunction were no longer necessary after the One Big Beautiful Bill Act rescinded the funds.

An EPA spokesperson said via email on August 4 that the agency is reviewing Tuesday's ruling and considering next steps. The court left open what actions the EPA may take next, noting that on the remaining legal arguments, the judges were evenly split on whether a temporary restriction on the EPA should continue.

Plaintiff Climate United said in an email statement: "Today, the D.C. Circuit judges confirmed what we have always known: the EPA acted unlawfully in freezing and dismantling the National Clean Investment Fund grant program. Despite attempts to harm grantees with false accusations and misinformation, there remains no legal basis to terminate our grant agreements and claw back funds already disbursed to our bank accounts."