Appeals court questions shifting reasons for Trump’s EPA killing clean energy contracts

A federal appeals court on Tuesday conducted a rigorous examination of both the Trump administration and nonprofit organizations selected to operate a $20 billion “green bank” program, following the controversial termination of their contracts. The case, now before the U.S. Court of Appeals for the District of Columbia Circuit, has significant implications for the future of the Greenhouse Gas Reduction Fund, a Biden-era climate initiative that the current administration has moved to dismantle.

During the three-hour oral arguments, judges pressed government attorneys about what appeared to be shifting justifications for canceling the program. Initially, the Environmental Protection Agency froze the funds in February 2025 with vague explanations and allegations of waste and fraud. Later, the agency pivoted to expressing broader concerns about insufficient EPA oversight of the program.

“The way these were structured was fundamentally inappropriate and unacceptable and required doing them over,” argued Yaakov Roth, representing the EPA, maintaining that the government possesses wide discretion in contracting decisions.

The legal dispute centers on Climate United Fund and other nonprofits selected by former EPA Administrator Michael Regan to manage the green bank initiative. These organizations were tasked with financing thousands of climate change projects and promoting environmental justice, with billions of dollars placed in a designated Citibank account for their use.

Shortly after President Trump returned to office in January 2025, EPA Administrator Lee Zeldin targeted the program, citing potential fraud and conflicts of interest. The agency subsequently froze the Citibank funds, initiated federal investigations into the nonprofits, and ultimately canceled the grants altogether.

The court’s full panel agreed to rehear the case after a three-judge panel ruled 2-1 in September that federal officials have broad authority to cancel congressionally appropriated funds without facing lawsuits in federal district court. This decision had overturned a ruling by U.S. District Judge Tanya Chutkan, who found the EPA unable to substantiate Zeldin’s accusations of wrongdoing and ordered that the nonprofits should not have their contracts terminated.

During Tuesday’s arguments, judges also questioned the nonprofits’ position, particularly regarding their claim to funds that may not have been fully under their control. The court expressed uncertainty about how to consider Congress’s July decision to rescind part of the 2022 law that originally authorized the green bank.

Adam Unikowsky, representing Climate United Fund, argued that repealing a statute “doesn’t retroactively render an illegal action legal,” insisting that the EPA had already acted unlawfully before the congressional rescission.

The case raises fundamental questions about executive power, congressional appropriations, and judicial oversight. Judge Cornelia Pillard, who dissented in the earlier panel decision, characterized the outcome as undermining not just the green bank groups but Congress’s constitutional authority to establish policy and maintain its traditional power of the purse.

The Greenhouse Gas Reduction Fund represents one of the most significant climate financing mechanisms established under the Biden administration. Its potential dismantling would mark a substantial setback for federal climate policy and affect countless clean energy projects across the country that were counting on this funding.

The legal battle highlights the stark policy differences between the Biden and Trump administrations regarding climate change priorities. While the Biden team positioned the fund as a critical tool for reducing emissions and creating green jobs, Trump’s administration has characterized it as wasteful and poorly managed.

Energy industry analysts note that the uncertainty surrounding the program has already created ripple effects in the renewable energy sector, with some developers delaying projects that were counting on financing through the green bank mechanism.

The court’s final decision will have far-reaching consequences not only for climate policy but also for the broader question of how administrations can unwind their predecessors’ initiatives and the judiciary’s role in refereeing such disputes.