Divided federal appeals court says Trump administration was wrong to terminate climate funds

FILE - President Donald Trump, left, speaks during an event with Environmental Protection Agency director Lee Zeldin in the Roosevelt Room of the White House, Feb. 12, 2026, in Washington. (AP Photo/Evan Vucci, File)

WASHINGTON – A divided federal appeals court on Tuesday said the Trump administration improperly terminated billions of dollars in funds to boost clean energy projects, handing a win to a coalition of nonprofits picked to run the Biden-era effort.

Climate United Fund and other nonprofits won’t have access to their funds immediately as the decision will be put on hold for several days giving the Environmental Protection Agency time to ask the Supreme Court to step in.

The closely divided ruling by the full U.S. Court of Appeals for the District of Columbia is a loss for the Trump administration in one of its earliest efforts to dismantle President Joe Biden’s campaign to reduce climate-warming greenhouse gases. The Greenhouse Gas Reduction Fund, commonly referred to as a “green bank,” is a $20 billion congressionally authorized program that provided money to nonprofits that would then make loans and invest in small energy projects, energy-efficient buildings and transportation.

EPA Administrator Lee Zeldin accused Climate United Fund and other nonprofits picked to run the green bank of mismanagement and potential fraud. He froze billions that had been placed in a Citibank account for the program and then terminated their grants. The groups disputed any wrongdoing and sued, arguing the Trump administration 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.

In September, a divided three-judge panel of the same appeals court overturned a lower court and said the Trump administration had broad power to cancel grants without having to face charges of illegality in federal court. The full appeals court agreed to revisit that decision, a rare occurrence reserved for the most important cases.

The green bank was created by the Inflation Reduction Act. President Trump’s tax and spending bill last year, however, repealed part of the law that established the bank and rescinded money that hadn’t already been obligated to its recipients. That added a layer of complication.

Six of 10 judges agreed with a lower court judge that the EPA likely violated the law when it terminated the grants and tried to claw back funds based on a policy disagreement. This would likely contradict the law's direction to spend money on the program, they said.