Congress Reverses Green Bank Funding, EPA Lawsuit Looming

Congress Reverses Green Bank Funding, EPA Lawsuit Looming \ Newslooks \ Washington DC \ Mary Sidiqi \ Evening Edition \ Congress’s new tax and policy bill repeals the green bank established under the Inflation Reduction Act and rescinds unobligated funding. The EPA is urging courts to halt disbursements and terminate contracts, while nonprofits say most funds were already spent. The legal fight could shift to a simple contract dispute, limiting remedies.

Quick Looks

• Congress rescinded remaining, unobligated funding for the green bank.
• EPA argues repeal overrides a court order requiring fund disbursement.
• Nonprofit plaintiffs assert funds were already obligated and legally untouchable.
• Legal interpretation may pivot from constitutional claims to contract law.
• Potential shift to lump‑sum remedies if court views this as contract dispute.

Deep Look

In a significant legislative and political shift, Congress has passed a sweeping tax and policy bill that effectively repeals a critical component of President Biden’s climate agenda—the Greenhouse Gas Reduction Fund, colloquially known as the “green bank.” Established under the Inflation Reduction Act of 2022, the green bank was created to channel $20 billion in federal grants toward nonprofit organizations helping communities transition to cleaner energy and reduce greenhouse gas emissions. Now, that fund faces dismantling under new legislation backed by Republicans and supported by the Trump-aligned Environmental Protection Agency (EPA).

This development arrives amid a high-stakes legal battle between the EPA and several nonprofits, including Climate United Fund, over access to the already awarded funds. Earlier this year, these organizations filed a lawsuit in federal court against the EPA, its Administrator Lee Zeldin, and Citibank—the financial institution overseeing the fund’s distribution—accusing them of unlawfully freezing billions of dollars in approved grants.

The nonprofits claim that the EPA’s freeze violates both federal law and the contractual obligations established through the 2022 legislation. Their argument hinges on the assertion that much of the money had already been obligated, if not fully disbursed, before the freeze was enacted. They contend that once these funds were committed through legal agreements, the government cannot arbitrarily reverse course without due process.

However, with the passage of the new bill, which specifically repeals the provisions of the Inflation Reduction Act that created the green bank, the EPA is now leveraging the new legislation as legal grounds to cancel the grants and reclaim any unobligated funds. In a court filing on Thursday, the EPA argued that this legislative action mandates the reversal of a previous federal court decision that required the agency to release part of the funds to the nonprofits. According to the EPA, because Congress has explicitly revoked the green bank’s legal foundation and rescinded the remaining funds, the legal basis for the grants no longer exists.

“This changes everything,” the EPA’s legal team asserted in the filing, claiming the nonprofits are holding taxpayer money “hostage” and that the agency has a clear mandate from Congress to terminate the program entirely.

But nonprofits involved in the suit, including Climate United Fund, aren’t backing down. In a public statement, CEO Beth Bafford pushed back firmly against the EPA’s claims, stating, “Our funds have already been obligated and disbursed. Any effort to claim otherwise is simply a lie to justify illegal attempts to claw back funds intended to benefit communities across the country.” She emphasized that any attempt to retrieve these funds would require a distinct legal process not currently being followed by the agency.

The case has drawn national attention, not just for its policy implications but for its broader political and constitutional undertones. The program’s repeal and the subsequent actions by the EPA mark a major rollback of the Biden administration’s climate initiatives, aligning with former President Donald Trump’s opposition to environmental regulations and his support for fossil fuel development.

Administrator Zeldin has been vocal in his criticism of the green bank, referring to the $20 billion program as fraught with “conflicts of interest” and labeling it as potentially criminal in nature. In interviews, including an appearance on Fox News, he has characterized the program as a “clear cut case of waste and abuse.” By March of this year, under Zeldin’s leadership, the EPA had already terminated the program’s grants, citing fraud concerns—though no substantive evidence was presented in court.

Federal District Judge Tanya Chutkan had previously ruled in favor of the nonprofits, criticizing the EPA for failing to substantiate its fraud claims and attempting to shift its legal rationale. Her decision temporarily restored partial access to the funds but has since been suspended pending appeal.

The EPA’s current strategy hinges on reclassifying the legal dispute as a contract matter rather than a constitutional or statutory violation. If successful, this approach would transfer the case to the U.S. Court of Federal Claims, a court that can only award monetary compensation—not force the government to release specific funds. This legal tactic could be decisive, as it may limit the remedies available to the nonprofits and insulate the EPA from further judicial orders mandating grant disbursement.

In its most recent filing, the EPA also cited Republican Senator Shelley Moore Capito of West Virginia, chair of the Senate Committee on Environment and Public Works. Capito previously stated that the bill’s intent was to rescind unspent funds and reduce the federal deficit, while criticizing the Biden-era administration of the green bank for lacking oversight and transparency. “This action reflects not only Congress’s deep concern with reducing the deficit, but EPA’s administration of the (green bank) under the Biden administration, the agency’s selection of grant recipients, and the absence of meaningful program oversight,” the agency quoted her as saying.

At stake are not just billions of dollars, but the federal government’s ability to support localized climate action through nonprofit partners. The controversy encapsulates the stark divide between Democratic climate policies and Republican efforts to rollback green initiatives. With the future of climate-related grantmaking now caught in legal limbo, the ultimate outcome of this case could set a precedent for how resilient federally backed environmental programs will be against future political opposition.

While the legal proceedings continue, communities across the U.S. that were promised funding now face uncertainty, with projects either paused or indefinitely stalled. For climate advocates, the battle over the green bank is more than a budgetary issue—it’s a symbolic and strategic confrontation over the country’s environmental direction in a rapidly warming world.

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