FILE PHOTO: Signage at the headquarters of the United States Environmental Protection Agency (EPA) in Washington, D.C., U.S., February 18, 2025. REUTERS/Kent Nishimura/File Photo

By Nate Raymond

(Reuters) -President Donald Trump's administration can proceed with terminating more than $16 billion in grants awarded to non-profit groups to fight climate change, a U.S. federal appeals court ruled on Tuesday.

Trump's predecessor Joe Biden's signature 2022 Inflation Reduction Act had awarded the grants aimed at reducing greenhouse gas emissions. The Environmental Protection Agency under Trump had sought to terminate the grants.

The EPA under administrator Lee Zeldin maintained the program did not align with the agency's priorities, and it cited concerns with potential fraud, waste and abuse. The FBI and Justice Department under Trump also investigated the program.

By a 2-1 vote, a panel of the U.S. Court of Appeals for the District of Columbia Circuit ruled that a lower-court judge lacked jurisdiction to hear the case brought by five of eight of the non-profits who had collectively been awarded $20 billion under the law's Greenhouse Gas Reduction Fund program.

U.S. Circuit Judge Neomi Rao said that because the grant recipients' case was essentially contractual in nature, the case largely belonged before a specialist court that hears monetary claims against the government, the Court of Federal Claims.

While U.S. District Judge Tanya Chutkan did have jurisdiction to hear a claim that the EPA violated the U.S. Constitution by not abiding by Congress' funding decisions, Rao said the agency did no such thing, as nothing in the law limited Zeldin's discretion to withhold or terminate grants.

Rao's opinion was joined by a fellow Trump appointee and prompted a dissenting opinion by U.S. Circuit Judge Cornelia Pillard, an appointee of Democratic President Barack Obama, who called the administration's actions an "unlawful nullification of Congress’s duly enacted policy."

The grant funds were being held by Citibank and had been awarded to Climate United Fund, Coalition for Green Capital, Power Forward Communities, Inclusiv and Justice Climate Fund. They sued after access to their collective funding worth over $16 billion was frozen.

Chutkan issued a preliminary injunction in April, requiring Citibank to disburse the funds. But her ruling was paused while the appeal was considered.

"It's fantastic to see reason prevail in the court system," an EPA spokesperson said in a statement.

Climate United CEO Beth Bafford in a statement called the ruling disappointing but vowed "to press on for communities across the country that stand to benefit from clean, abundant, and affordable energy."

(Reporting by Nate Raymond; Editing by Howard Goller and Andrea Ricci)