D.C. Circuit en banc panel rules EPA cannot claw back $20 billion in green bank grants

The full bench of the U.S. Court of Appeals for the D.C. Circuit ruled on 4 August 2026 that the Environmental Protection Agency acted unlawfully when it moved to terminate $20 billion in grants under the Greenhouse Gas Reduction Fund (GGRF), restoring a preliminary injunction that had been vacated by a smaller panel nearly a year earlier^[1]. The decision sets up a probable appeal to the U.S. Supreme Court and leaves the funds - held in accounts at Citibank - still frozen for now.

What the court decided

The en banc majority ruled that the EPA's effort to claw back already-obligated grant money on the basis of a policy disagreement likely ran afoul of a mandatory congressional appropriation. The court restored the April 2025 injunction issued by U.S. District Judge Tanya Chutkan, which had required Citibank to disburse the frozen funds to the nonprofit grantees. That injunction had been overturned in September 2025 when a three-judge D.C. Circuit panel ruled 2-1 in the EPA's favor; the full court then agreed in December 2025 to rehear the case en banc, with oral arguments held on 24 February 2026.

Under the reinstated order, grantees could begin drawing down funds as early as 11 August 2026 - but only if the administration does not seek an emergency stay from the Supreme Court first. The Department of Justice is widely expected to file that appeal within days.

The money and the mechanism

Congress appropriated $27 billion for the GGRF through the 2022 Inflation Reduction Act, directing the EPA to make grants to states, municipalities, tribal governments, and eligible nonprofits to finance low-carbon technology deployment^[1]. Of that total, $20 billion was awarded in August 2024 to eight nonprofits across two programs: the National Clean Investment Fund and the Clean Communities Investment Accelerator.

The fund's structure was unusual: rather than holding money in the U.S. Treasury and disbursing it incrementally, the EPA designated Citibank as a financial agent to hold the funds in accounts nominally belonging to the grantees. That arrangement became central to the legal dispute - the EPA argued the case was a contractual matter belonging in the U.S. Court of Federal Claims, not a constitutional one for district court. The en banc majority rejected that framing.

The five plaintiff organizations - including Climate United Fund, Coalition for Green Capital, Power Forward Communities, Inclusiv, and Justice Climate Fund - had argued that the freeze paralyzed their operations and blocked access to funds that had already been legally obligated.

EPA's position and the One Big Beautiful Bill

EPA Administrator Lee Zeldin moved to freeze the grants in March 2025, citing concerns about oversight, transparency, and potential fraud. The agency has consistently maintained that recovering the funds is a stewardship obligation. In a statement following Tuesday's ruling, the EPA said it is reviewing the judgment and considering next steps.

The administration's legal position was further complicated by the One Big Beautiful Bill Act, signed into law on 4 July 2025, which repealed the statutory authority for the GGRF and rescinded its unobligated balances. The court's majority did not treat that repeal as dispositive for funds already obligated under signed grant agreements.

What to watch

The immediate question is whether the Supreme Court will grant an emergency stay before 11 August 2026, keeping the Citibank accounts frozen while the justices decide whether to take the case. If the Court declines to intervene, grantees have indicated they would move quickly to draw down funds for past expenses and new commitments. Career EPA attorneys had previously warned that a prolonged freeze could expose the government to "potential multi-billion dollar damage claims" in federal claims court - a risk that remains live regardless of how the Supreme Court rules on the injunction itself.