A US appeals court unblocked $20 billion in federal climate grants from the Inflation Reduction Act, rejected EPA's recapture attempt.

The U.S. Court of Appeals for the District of Columbia Circuit blocked the Trump administration on Tuesday from rescinding $20 billion in climate grants, rejecting what the court characterized as an attempt to overturn the Greenhouse Gas Reduction Fund "based solely on a policy disagreement" with the Inflation Reduction Act.

In a three-page unsigned opinion, a divided court overturned an earlier panel decision, ruling that the Environmental Protection Agency likely violated the Inflation Reduction Act when it attempted to terminate and claw back grants awarded to Climate United and other nonprofits. The grants funded "projects across the United States that support domestic clean energy development, build healthy and affordable housing, accelerate American-made electric vehicle manufacturing, and save hard-working Americans money on their bills," according to Climate United's March filing.

Six of the court's 10 judges upheld a preliminary injunction rejecting the EPA's efforts to terminate the grant program and recover $6.97 billion disbursed to Climate United. The court found that the EPA had not indicated it would cease pursuing fund repeal if the injunction were lifted.

Congress authorized $19.97 billion through the Inflation Reduction Act in 2022 to support local governments and other beneficiaries in achieving climate, clean energy, infrastructure, and equity goals. Local governments had planned projects and made budgetary decisions based on these grants; as an amicus brief from the National League of Cities and the U.S. Conference of Mayors noted in February, "Local governments have suffered, and remain at risk of further suffering" from the funding freeze.

Last year, Congress repealed unspent EPA IRA funding through the One Big Beautiful Bill Act. EPA Administrator Lee Zeldin subsequently terminated GGRF funding to eight National Clean Investment Fund and Clean Communities Investment Accelerator entities, citing "serious concerns regarding self-dealing and conflicts of interest, unqualified recipients, and reduced government oversight."

Four judges stated that a portion of the preliminary injunction was no longer warranted following the One Big Beautiful Bill Act's repeal. The court remained evenly divided on whether temporary restrictions on EPA actions should continue, leaving the agency's next steps unclear.

Climate United countered that the EPA's actions were unlawful, stating: "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."