Former President Joe Biden’s appointees crafted an unusual strategy for funneling hundreds of billions in government and private dollars to climate projects in lower-income communities — and for doing it fast enough that an incoming Trump administration would be unable to stop it.
Now, the program is fighting for its life.
A federal judge has given herself until Tuesday to rule on whether EPA can continue freezing the $20 billion in federal dollars at the heart of the climate effort, while the courts sort out whether the administration can cancel the grants entirely.
That money has been sitting for months in accounts at Citibank, where EPA’s Biden-era leaders had placed it for the use of eight affordable housing and community-lending nonprofits. If they remain cut off from the cash, at least two of the groups have said they will go under.
The nonprofits have already committed over $2.6 billion of the money to projects across the U.S., according to a POLITICO analysis of investments by five of the eight groups. But most of that is now halted.
The fight over the $20 billion has mushroomed into one of the messiest disputes in President Donald Trump’s attempt to throttle Biden’s climate and energy agenda, leading to court battles and investigations, including an FBI criminal probe. At its heart, it’s a battle over Trump’s power to pull back federal dollars that have gone out the door — and over Biden’s attempt to use EPA to reshape low-income communities.
Democratic lawmakers embedded the money in Biden’s 2022 climate statute, setting deadlines for EPA to award, contract and disburse the $20 billion months before the next presidential term. They hoped the money would lure about $200 billion in private capital, aiding projects such as community solar power, electric transportation and efficiency upgrades for rental housing.
But even before Trump took office, agency watchdogs warned that the statute’s tight deadlines, vast sums of money and small administrative budgets could make it vulnerable to waste and misuse.
Those concerns have come back to bite the effort, as Republicans including EPA Administrator Lee Zeldin allege — without evidence — that the program has been marked by waste, cronyism and an attempt to evade federal oversight. Democrats, in turn, charge that Trump’s appointees are bending or breaking the law in their efforts to get the money back.
“What’s at stake here is that the communities that need clean energy the most — because of the cost savings, because of the jobs, because of the health implications of reducing air pollution — those communities are the ones that have been left out of the clean energy transition that’s already well underway,” said Andreas Karelas, founder and executive director of RE-volv, a nonprofit that was under contract with one grant recipient to develop a program that would bring solar power to 100 households on tribal lands in Kansas and Nebraska. The EPA program, he said, “was going to be a massive injection of capital and momentum to support bringing clean energy equitably everywhere.”
Karelas estimated that his group has $80 million worth of projects “lined up” in 25 states.
Alison Cassady, who held senior positions at EPA and the White House during Biden’s term, defended the former administration’s diligence in setting up the program — and said she was surprised to see the Trump-era agency trying to regain control of those dollars.
“We did everything we could to do it by the book,” she said. “They don’t care about the book..”
Republican lawmakers also expressed skepticism last year that Trump could rescind the money once EPA had doled it out. Recovering the funds at that stage would be “a ridiculous thought,” Senate Environment and Public Works Chair Shelley Moore Capito (R-W.Va.)told POLITICO weeks after Trump’s victory in November.
“Money that’s already been obligated and out the door, that’s a decision that’s final,” she said at the time. “We’re not gonna go claw back money.”
‘This really is a transformative investment’
The $20 billion program is part of the Greenhouse Gas Reduction Fund, the largest pot of direct funding in Biden’s 2022 climate package, the Inflation Reduction Act. It stands out from the smorgasbord of tax credits and Energy Department loan guarantees that make up the bulk of IRA funding because it focuses on poor communities.
The full greenhouse gas fund — which totals $27 billion — is designed to demolish financial barriers that have kept working-class people in urban and rural America from enjoying the benefits of technologies such as renewable energy and electric transportation. Its boosters compare it to the rural electrification program of the 1930s, which used federal dollars to connect broad swaths of rural America to the power grid.
As with the Depression-era program, the green finance program would use federal dollars to attract private investment. The Biden administration estimated the program would mobilize more than $200 billion.
“This really is a transformative investment in ensuring that the clean energy technologies that are going to dominate the 21st century global economy are going to be available to the communities that have been historically left behind on economic investment and opportunity,” said Sam Ricketts, co-founder of green strategy firm S2 Strategies, who has been working on legislation to create a national green bank since he was an aide to then-Rep. Jay Inslee (D-Wash.) in the mid-2000s.
The current legal fracas is over a subset of those funds — $20 billion — that the government had earmarked for two nonprofit-driven programs and transferred last year to Citibank, which is acting as the program’s financial agent under an agreement with the Treasury Department.
Democrats in Congress and the Biden administration alike thought they had Trump-proofed the program.
The IRA, which passed entirely with Democratic support, gave EPA little more than two years to design the program, run grant competitions and award funds. If the agency didn’t obligate the funds by the end of September 2024, the money expired.
And EPA hit that target. The ink was dry on those contracts weeks before the law’s Sept. 30, 2024, deadline — and well before Inauguration Day.
“We worked hard, obviously, both at the political and career level to obligate the funding expeditiously,” said Cassady, the former EPA staffer. “But it was also really important to us to maintain high, rigorous standards for each of the grants. We didn’t want to cut corners.”
Some government watchdogs expressed concern last year about the program’s unusual structure and the vast amount of money involved, as well as the fact that Congress had provided a relatively meager amount of money for EPA to administer the program.
EPA’s then-inspector general, Sean O’Donnell, told the House Energy and Commerce Committee last year that he was “alarmed” by the program’s complexity, which he said was akin to EPA funding an investment bank.
Nicole Murley, EPA’s current acting inspector general, advised the committee in written answers last week that new programs like the green banking fund are “inherently more prone to inefficiencies and errors than existing programs.” She added that the statute’s tight timeline for setting up the program also “creates concerns.”
The inspector general’s office has launched a review of the program.
The program’s core mission — which stands at the intersection of climate action and wealth redistribution — also puts a target on its back. The Trump administration has pledged to kill federal policies that penalize the fossil fuels industry or that hint of diversity, equity and inclusion. The fact that this program does both all but guaranteed that the administration would try to dismantle it.
‘Gold bars’
Almost three months into the second Trump administration, the program is in limbo. The balances of two of its three grant programs are frozen, and Zeldin has pronounced them “terminated” — though his power to do that is being litigated.
The third program — a $7 billion grant initiative to bring solar power to low-income communities that enjoys some bipartisan support — is alive for now. Most of its recipients are state agencies. But the Trump administration froze its funds earlier in the president’s term, and recipients are subject to an investigation.
Still inaccessible are a $14 billion national green lending facility and a $6 billion assistance program for community lenders looking to finance projects such as solar panels and heat pumps.
Those eight grantees are now embroiled in the court battle over EPA’s attempt to claw back the funding. U.S. District Judge Tanya Chutkan in Washington, a Barack Obama appointee, is due to rule by late Tuesday on whether the eight nonprofits may access their accounts at Citibank, which are now frozen, while litigation proceeds.
If Chutkan doesn’t issue that order, the account freeze will enter a third month, and at least two awardees have said they will soon go out of business.
It took until Feb. 12 for Zeldin to begin publicly raising alarm at the $20 billion programs, which had been left untouched by Trump’s early freezes because the funds were at Citibank.
Zeldin, a former New York representative who has undergone a conversion from House Climate Solutions Caucus member to pro-Trump firebrand, posted on Xthat evening that Treasury’s arrangement with Citibank must “immediately be terminated” and the money returned to federal coffers.
“Shockingly, roughly $20 billion of your tax dollars were parked at an outside financial institution by the Biden EPA,” Zeldin told his viewers. “This scheme was the first of its kind in EPA history, and it was purposely designed to obligate all of the money in a rush job with reduced oversight.”
Zeldin didn’t give a reason for his assessment of the program. He made no specific allegations against any of the grantees, and still hasn’t. But he referenced a video taken covertly late last year by the conservative media group Project Veritas, which shows a Biden EPA adviser likening the agency’s sprint to finish disbursing climate law funds before Trump’s inauguration to “throwing gold bars off the edge” of the Titanic.
Zeldin has cited the video clip in interviews and congressional hearings as evidence that the Biden team did a shoddy job in designing the program and awarding the grants — though a lawyer for the former staffer, Brent Efron, told The New York Times that he wasn’t talking about the Greenhouse Gas Reduction Fund.
Still, “gold bars” has become EPA shorthand for the green lending program, popping up even in the agency’s court filings.
Days after Zeldin’s X appearance, a career federal prosecutor in Washington resigned after alleging that Trump administration officials had pressured her to launch a criminal investigation against the green banking grant recipients despite a lack of evidence of waste, fraud or abuse. Denise Cheung, the head of the criminal division in the U.S. Attorney’s Office, said in her resignation letter that the Justice Department had also sent a letter to Citibank “recommending” that it freeze the accounts while an investigation proceeded.
Later, The Washington Post reported that interim U.S. Attorney Ed Martin had applied for a warrant to seize the accounts, which a U.S. magistrate judge rejected.
EPA could recover the funds by issuing a “notice of exclusive control,” which would require it to offer evidence of malfeasance on the part of the grantees. But as of Friday, it had not.
Still, on Feb. 19, all eight grantees under the two nonprofit programs found they could no longer access their funds from the Citibank accounts. And because EPA’s grant terms bar recipients from drawing down funds for expenses more than two weeks in advance, they would all run out of grant money by early March.
For two of the program’s largest recipients — Climate United Fund and Power Forward Communities — that created an existential crisis. Both were new entities launched by older nonprofits expressly to compete for the IRA grant funds.
Climate United Fund, which had received the largest award of nearly $7 billion, began emergency fundraising and cutting costs.
“We paused all hiring, including a handful of folks who were supposed to, you know, who had start dates, and we have deferred those start dates and we cut salaries of most or all senior staff,” said Beth Bafford, the group’s CEO.
Power Forward Communities, which EPA had awarded $2 billion, would later tell the court that it had struggled to pay employees or cover basic operating costs. Power Forward also lost two of its member organizations, Habitat for Humanity and United Way, which both cited the need to conserve their financial resources.
In March, the grantees’ pared-back staffs were busy responding to both a summons from DOJand a request for records from EPA. The DOJ investigation is a criminal probe, according to two people who were granted anonymity because they feared reprisals. But grantees declined to comment on the probe, and the office of the U.S. attorney general for the District of Columbia told POLITICO’s E&E News last week that it could “neither confirm nor deny the existence of an investigation.”
Climate United sued EPA and Citibank on March 8, arguing that both had violated the terms of their contracts in freezing the funds — and, in EPA’s case, the will of Congress. The Coalition for Green Capital, which had been awarded $5 billion in grants, and Power Forward Communities followed suit. The cases were consolidated and combined with a lawsuit brought by Democratic state attorneys general who said the freeze had stymied projects planned for their states.
On the eve of the first federal court hearing, Zeldin posted a video announcing that he was terminating the grants “based on substantial concerns regarding program integrity, objections to the award process, programmatic fraud, waste and abuse and misalignment with the agency’s priorities.”
The fight has had a palpable impact on the grant recipients.
The Coalition for Green Capital dispensed $1.8 billion to 18 subrecipients, which are expected to close on $888 million in projects by the next reporting period. The investments are expected to mobilize $2.4 billion from other investors. One of those awards helped create the Municipal Investment Fund, which would select communities from every state to receive technical assistance and financial support for clean energy projects.
The subrecipient managing the fund, ICLEI — Local Governments for Sustainability USA, was reviewing more than 100 applicants when EPA issued its termination letter, Executive Director Saharnaz Mirzazad told POLITICO.
“EPA’s actions not only dissuaded communities from applying to the Municipal Investment Fund, but have now prevented those who applied from accessing funds intended to update our nation’s critical infrastructure,” Mirzazad wrote in a statement. “As a non-profit, we cannot risk awarding $60 million in grants and our subgrantees incurring costs without certainty we will have access to these funds.”
EPA’s case
Zeldin has made numerous public statements on X and to right-wing media organizations over the last two months in which he accused Biden EPA officials who set up the fund of “kickbacks,” “theft” and “graft.”
The crux of his argument is that the grantees or their parent organizations were Biden administration cronies.
For example, Democratic former Georgia gubernatorial candidate Stacey Abrams once served as a senior counsel to Rewiring America, an electrification nonprofit that helped launch Power Forward Communities. That tie drew her a mention in Trump’s March address to Congress, but Power Forward’s CEO has said that Abrams has no current relationship with his group and “has not received a penny of this EPA grant.”
“I’m proud of my work protecting civil rights & lowering energy costs for Georgians,” Abrams posted on X the night of Trump’s speech. “Someone has to deliver — because Trump is taking our hard-earned money to cut Elon Musk’s taxes.”
Zeldin has also pointed out that Jahi Wise, a former senior EPA official who oversaw the banking program’s design during the Biden administration, had previously worked for the Coalition for Green Capital.
In a March letter to EPA’s acting inspector general, acting Deputy Administrator Chad McIntosh alleged that Wise “personally oversaw a $5 billion grant to his previous employer, the Coalition for Green Capital — without recusing himself.”
But Wise was away on paternity leave during the fall of 2023, when the agency was evaluating the applications. Before that, Wise signed a recusal document with EPA’s ethics office that barred him from taking part in award selection activities for which CGC was an applicant.
Zeldin has also said the decision to run the program through a financial agent — Citibank — gave EPA less oversight over the program.
“I’ll tell you what is most frustrating is not having accountability over funding,” Zeldin said recently on Fox News presenter Brian Kilmeade’s radio show. “To inherit a system where I don’t have eyes on tens of billions of dollars.”
The arrangement with the bank meant that EPA could see how the money was being managed. But it couldn’t take control of the accounts unless individual grant recipients failed to deliver on their contracts or engaged in fraud.
But grantees and former Biden officials say the arrangement with Citibank gives EPA greater ability to track how the money is used than it would have had if it remained at Treasury.
Financial agent arrangements aren’t uncommon at other federal agencies. Trump’s Treasury Department in 2020 created an entity called the Municipal Liquidity Facility to act as a financial agent for the pandemic-era business lending program. It also used PJT Partners, an investment bank, to administer the pandemic-era airlines relief program.
As the nonprofits wait for the court to rule on their funding, the roots of Zeldin’s attacks on the program have begun to spread in Washington.
Lawmakers on the House Energy and Commerce Committee launched an investigation into the nonprofits Friday.
Chair Brett Guthrie (R-Ky.) foreshadowed the probe in a February oversight hearing, which he said was “just the beginning” of his panel’s scrutiny of the fund.
But he reserved his sharpest words for EPA, rather than the grant recipients.
“I want to emphasize that we’re not insinuating that all applicants and recipients are guilty of wrongdoing, rather the sheer pace and volume with which this funding was awarded raises questions,” he said.
Timothy Cama and Catherine Allen contributed to this report.
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