{"id":24710,"date":"2025-04-02T15:44:30","date_gmt":"2025-04-02T20:44:30","guid":{"rendered":"https:\/\/blogs.law.columbia.edu\/climatechange\/?p=24710"},"modified":"2025-05-05T09:06:53","modified_gmt":"2025-05-05T14:06:53","slug":"epas-attacks-on-greenhouse-gas-reduction-fund-and-the-fate-of-iras-green-banks","status":"publish","type":"post","link":"https:\/\/blogs.law.columbia.edu\/climatechange\/2025\/04\/02\/epas-attacks-on-greenhouse-gas-reduction-fund-and-the-fate-of-iras-green-banks\/","title":{"rendered":"EPA’s Attacks on Greenhouse Gas Reduction Fund and the Fate of IRA\u2019s \u201cGreen Banks\u201d"},"content":{"rendered":"
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The Greenhouse Gas Reduction Fund (GGRF), one of the most critical climate spending programs in the Inflation Reduction Act (IRA), has come under significant fire from the Trump administration. In the span of twenty days, EPA has blocked GGRF awardees from accessing their grant accounts, made baseless accusations of program-wide fraud, and taken the extraordinary step of terminating $20 billion in National Clean Investment Fund (NCIF) and Clean Communities Investment Accelerator (CCIA) grants. The awardees have pushed back, challenging EPA\u2019s actions in court. They scored an early victory last month, with the court issuing a temporary restraining order to prevent EPA from giving effect to its grant terminations, but there is still a long way to go in the litigation.\"\"<\/a><\/p>\n

The fate of NCIF and CCIA grants is a pressing question for the awardees, sub-awardees, and communities nationwide that stand to benefit from the unprecedented federal investment in climate action. This blog post provides a summary of EPA\u2019s actions to date and the ensuing litigation. It offers some initial analysis of the cases against EPA and what might be next for the GGRF.<\/p>\n

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Background<\/h4>\n

The GGRF was created by section 60103<\/a> of the IRA, which appropriated $27 billion to EPA to make grants to states, municipalities, tribal governments, and eligible nonprofit organizations to finance the deployment of low-carbon technologies and carry out other greenhouse gas emission reduction activities. Under the Biden administration, EPA awarded<\/a> the entire $27 billion in GGRF grants. President Trump now wants to claw much of that back.<\/p>\n

Recipients of NCIF and CCIA grants are often referred to as \u201cGreen Banks\u201d because the awardees must use their IRA funding to finance clean energy projects. Briefly, NCIF<\/a> awardees serve as \u201cnational clean financing institutions that deliver accessible, affordable financing for clean technology projects nationwide.\u201d CCIA<\/a> awardees serve as \u201chubs that provide funding and technical assistance to community lenders working in low-income and disadvantaged communities.\u201d<\/p>\n

Before President Biden left office, EPA selected eight awardees, which together received $20 billion in NCIF and CCIA funding. All eight awardees entered into grant agreements with EPA, submitted work plans to the agency, and began drawing down grant funds and implementing their programs.<\/p>\n

The process by which NCIF and CCIA awardees access their grant funds is a little different from some other EPA grants. For many EPA grants, money is dispersed through the Treasury\u2019s Automated Standard Application Payments (ASAP) system. Awardees make online payment requests and can generally only draw down money as they are ready to spend it.<\/p>\n

In setting up the NCIF and CCIA programs, EPA determined<\/a> that grant funds should instead be held in a bank designated as a financial agent of the government. EPA designated Citibank as the financial agent for the NCIF and CCIA programs. Awardees were required to open deposit accounts at Citibank, drawdown their entire award balance from their ASAP accounts, and deposit it in their Citibank accounts. When President Trump was inaugurated, all eight NCIF and CCIA awardees had already set up their Citibank accounts and were accessing funds through them.<\/p>\n

It is worth noting that, although less common than the use of ASAP, financial agent arrangements are certainly not unprecedented. The federal government has relied on them for decades under both political parties, including under President Trump<\/a>.<\/p>\n

According to NCIF and CCIA terms and conditions<\/a>, to ensure federal oversight, EPA can reassert exclusive control over the Citibank accounts but only in certain circumstances. In order to send Citibank a \u201cNotice of Exclusive Control,\u201d EPA must find \u201cthat the [Awardee] has failed to comply with the terms and conditions of [their] Award Agreement, and that noncompliance is substantial such that effective performance . . . is materially impaired or there is adequate evidence of waste, fraud, material misrepresentation of eligibility status, or abuse, and that EPA has initiated action . . . [to] terminate the Federal award.\u201d<\/p>\n

Frozen Citibank Accounts & Ensuing Lawsuits<\/h4>\n

President Trump\u2019s first attack on the IRA came on his very first day in office through Executive Order 14154<\/a>, in which he directed all federal agencies to immediately pause disbursement of funds under the IRA (as well as the Infrastructure Investment and Jobs Act). Despite creating mass chaos\u2014and leading to several lawsuits through which the government was ordered to unfreeze the funds multiple times (see here<\/a>)\u2014the initial government-wide freeze did not actually affect NCIF and CCIA. Awardees under those programs continued to be able to access their Citibank accounts for several weeks.<\/p>\n

However, on February 20, 2025, news outlets began reporting<\/a> that Citibank had frozen the NCIF and CCIA accounts at the direction of EPA, the Department of Justice, and the Federal Bureau of Investigation. On March 2, EPA requested<\/a> assistance from the Office of the Inspector General to investigate alleged \u201cfinancial mismanagement, conflicts of interest, and oversight failures within the Greenhouse Gas Reduction Fund.\u201d On March 4, EPA sent information requests<\/a> to the NCIF awardees, with a March 28 deadline for response. EPA indicated that responses were needed for it to conduct a compliance review, for which it had a \u201ccurrent lack of critical information.\u201d<\/p>\n

On March 8, 2025, NCIF awardee Climate United Fund filed a lawsuit against Citibank, as well as EPA and its Administrator, Lee Zeldin, to challenge the account freeze. This was quickly followed by lawsuits from the other two NCIF awardees, Coalition for Green Capital and Power Forward Communities, and NCIF and CCIA sub-awardees represented by state attorneys general. Those action have now been consolidated into a single case<\/a>. Most recently, CCIA awardees Inclusiv<\/a> and Justice Climate Fund<\/a> also filed lawsuits against EPA, which will likely soon be consolidated as well.<\/p>\n

On March 11, 2025\u201417 days before awardees\u2019 responses to EPA\u2019s information requests were due\u2014EPA sent all NCIF and CCIA awardees a Notice of Termination<\/a>. The notice purported to terminate the awardees\u2019 GGRF grants effective immediately based on EPA\u2019s \u201csubstantial concerns regarding program integrity, the award process, programmatic fraud, waste, and abuse, and misalignment with the Agency\u2019s priorities.\u201d The awardees have added challenges to the termination to their lawsuit. On March 18, the D.C. District Court issued a temporary restraining order<\/a>, enjoining EPA from giving effect to its termination notices and ordering EPA and Citibank not to transfer grant funds out of the awardees\u2019 accounts.<\/p>\n

The three NCIF plaintiffs have raised several arguments in their lawsuits to challenge EPA\u2019s unlawful funding freeze and subsequent grant termination. These include<\/a>: that the freeze and terminations were arbitrary and capricious in violation of the Administrative Procedure Act (APA); were not in accordance with the IRA or regulations that govern federal grant funding; violated the Appropriations Clause and Due Process Clause of the Constitution; and breached contractual duties, among other arguments. Although early, the district court\u2019s preliminary consideration<\/a> of the merits favors the plaintiffs\u2019 arguments. As the court stated, \u201cit does not appear that EPA Defendants took the legally required steps necessary to terminate these grants, such that its actions were arbitrary and capricious.\u201d<\/p>\n

Can EPA Lawfully Terminate NCIF and CCIA Grants?<\/h4>\n

Federal grant agreements contain termination clauses which outline permissible grounds for the termination of awards. In the case of NCIF and CCIA grant agreements, there is some ambiguity as to when termination is permitted because the agreements actually contain two sets of terms, each of which has its own termination clause: (1) general terms, which apply to all EPA grants, and (2) programmatic terms, which are tailored to the NCIF and CCIA programs.<\/p>\n

The general terms<\/a> outline two permissible grounds for unilateral termination of award agreements by EPA: (1) if the awardee does not comply with the agreement; and (2) \u201cpursuant to the programmatic terms and conditions.\u201d A previous version<\/a> of the general terms that was initially incorporated in the agreements also allowed EPA to terminate if the award \u201cno longer effectuates the program goals or agency priorities.\u201d However, the NCIF and CCIA award agreements were amended in December 2024 and the operative version<\/a> of the general terms no longer includes that ground. The termination clause in EPA\u2019s programmatic terms<\/a> is narrower and only allows for unilateral termination when the awardee does not comply with the agreement to an extent that \u201cmaterially impair[s]\u201d performance or there is evidence of \u201cwaste, fraud, material misrepresentation of eligibility status, or abuse.\u201d<\/p>\n

Having both termination clauses included in NCIF and CCIA award agreements raises the question, which one controls? The documents state that the programmatic terms \u201cclarify\u201d the general terms but do not \u201creplace or modify\u201d them. However, this doesn\u2019t clearly resolve the conflict between the two termination clauses. The NCIF awardees have argued in court filings<\/a> that the grounds for termination are limited to those outlined in the programmatic terms. EPA has countered<\/a> that it can rely on all grounds included in the programmatic and<\/em> general terms. Ultimately, it will be up to the judge to decide, but the NCIF awardees appear to have the stronger argument. The programmatic terms are expressed to \u201cclarify\u201d the general terms and the courts have long held<\/a> that \u201c[i]t is a \u2018standard rule of contract interpretation\u2019 that \u2018specific terms control over general ones.\u2019\u201d<\/p>\n

Regardless of how the court comes out on that question, EPA lacks evidence to justify termination based on any of the possible grounds it asserted. First, EPA has not presented evidence that awardees are in noncompliance with their award agreements in ways that \u201cmaterially impair\u201d performance, or even in insignificant ways.<\/p>\n

Second, EPA claims that there has been \u201cfraud, waste, and abuse\u201d in the NCIF and CCIA programs, but it has provided no evidence to support that allegation. When the D.C. District Court issued its temporary restraining order, Judge Chutkan stated<\/a> that EPA provided \u201cno legal justification for the termination,\u201d noting, \u201cvague and unsubstantiated assertions of fraud are insufficient.\u201d As the NCIF awardees further argued<\/a>, EPA\u2019s unsupported claims of \u201cfraud, waste, and abuse\u201d are undermined by the agency\u2019s own behavior leading up to termination. Most notably, in early March, EPA told NCIF awardees that it needed information from them in order to conduct a compliance review. But then, before the deadline for NCIF awardees to respond, EPA sent stock termination letters to all eight NCIF and CCIA awardees with no specific allegations of wrongdoing, suggesting EPA\u2019s claims are pretextual.<\/p>\n

Finally, \u00a0despite the fact that the operative version of the general terms removed the provision allowing EPA to unilaterally terminate awards that \u201cno longer effectuate[] the program goals or agency priorities,\u201d EPA claims that it has terminated on this basis too. At this stage in the litigation, EPA\u2019s arguments to support this claim are underdeveloped, but the agency\u2019s briefing<\/a> foreshadows a smattering of possible arguments, including that the December 2024 amendments to the agreement were invalid, or that federal regulations<\/a> authorize this even if it is not specifically included in the agreements.<\/p>\n

Even if EPA establishes that it may terminate awards that \u201cno longer effectuate[] the program goals or agency priorities,\u201d EPA is unlikely to succeed here too. EPA has made vague assertions<\/a> that the structure of NCIF and CCIA award agreements are misaligned with the agency\u2019s priorities to have \u201crigorous oversight and accountability in the administration of public funds\u201d but provides no evidence that oversight has been insufficient. It is also important to note that case law<\/a> from the first Trump administration suggests that program priorities must be evaluated based on the goals underlying the federal statute that created the program. The IRA outlines a very clear purpose for the GGRF program\u2014to reduce greenhouse gas emissions\u2014so EPA could not terminate awards under the GGRF simply because it no longer prioritizes greenhouse gas emissions reduction.<\/p>\n

What Is EPA\u2019s Endgame?<\/h4>\n

EPA claims<\/a> that it intends to re-obligate any clawed-back funds to new GGRF awardees. But the administration\u2019s open hostility to the IRA and climate policy calls into serious question the sincerity of that claim. It is possible that, if EPA somehow manages to defend its terminations in court and claw back funds, it will either fail to re-award them or re-award them to entities that will not carry out the purposes of the GGRF. In both cases, EPA would be violating its statutory obligation under the IRA to spend the funds Congress appropriated for the GGRF in accordance with the purposes outlined by the statute. However, enforcing that obligation could be challenging. For example, there is a real risk that an action challenging EPA\u2019s failure to spend funds appropriated for the GGRF would be considered moot.<\/p>\n

Typically, lawsuits to challenge an agency\u2019s failure to spend appropriated funds are moot once the funds \u201clapse,\u201d i.e., when the date of availability for those funds passes. (See, e.g., County of Suffolk, N.Y. v. Sebelius<\/em><\/a>; City of Houston v. Department of Housing & Urban Development<\/em><\/a>.) When funds lapse, they are transferred back to the Treasury and are no longer available for the agency to spend. As a result, a court cannot offer redress to the plaintiffs since there are no longer appropriated funds to be awarded.<\/p>\n

The difficulty in the GGRF context is that the statutory availability period ended on September 30, 2024. Although the D.C. Circuit Court of Appeals recognizes<\/a> \u201can equitable doctrine . . . that permits a court to award funds based on an appropriation even after the date when the appropriation lapses,\u201d the court requires that \u201cthe lawsuit was instituted on or before that date,\u201d which is impossible here. A plaintiff could argue that the equitable doctrine should be extended to this circumstance but a court may not find that argument compelling: \u201cEquity empowers the courts to prevent the termination of budget authority which exists, but if it does not exist, either because it was never provided or because it has terminated, the Constitution prohibits the courts from creating it no matter how compelling the equities.\u201d (See National Association of Regional Councils v. Costle<\/em><\/a>.) Given this, any funds EPA successfully clawed back could very well be gone from the GGRF forever.<\/p>\n

Conclusion<\/h4>\n

In the short time that President Trump has been in office, EPA has already taken significant steps to carry out the administration\u2019s threats to GGRF programs, most staggeringly with the unfounded cancellation of $20 billion in awards. Given the strong arguments that the terminations were pretextual and unlawful, NCIF and CCIA grants will surely soon be restored to ensure that communities nationwide will reap the greenhouse gas reduction benefits promised in the IRA.<\/p>\n

For more information on EPA\u2019s and awardees\u2019 obligations under the GGRF program, see the following key documents:<\/p>\n