EPA cancels $20 billion Green Bank grants, what was this grant for?

The Environmental Protection Agency (EPA) has cancelled $20 billion in grants for clean energy projects, originally set aside by the Biden administration under the 2022 Inflation Reduction Act to combat climate change.

EPA Administrator Lee Zeldin said the decision was made due to concerns about fraud, waste, and lack of oversight. “I have officially terminated these grant agreements,” Zeldin said in a video statement. He called the program a “gold bar” scheme with “conflicts of interest and potential fraud.”

Zeldin said, “$20 billion of your tax dollars were parked at an outside financial institution to limit government oversight — doling out your money through eight pass-through, politically connected, unqualified, and some brand-new nonprofit organisations.”

What was Green Bank program?

The Green Bank funds projects that reduce pollution and switch to cleaner energy sources. The $20 billion program was designed to offer low-cost loans to businesses and developers for climate initiatives, which include things like installing solar panels and retrofitting homes to make them more energy efficient.

The goal was to make clean energy more affordable and accessible, especially in low-income areas. The money was given to eight financial groups to help build solar panels, wind farms, and other green energy solutions.

Beth Bafford, CEO of Climate United Fund, one of the funded organisations, said, “Our legally binding contract with the EPA cannot be terminated based on unsupported claims and misinformation.” She added that her organisation would pursue legal action.

Why did EPA cancel grants?

Several organisations awarded the grants are suing the EPA. Climate United Fund claims the government has no legal right to take back the money. Two other nonprofits, the Coalition for Green Capital and Power Forward Communities, have also sued Citibank, which froze the funds.

“The freeze threatens the group’s ability to issue loans and pay employees,” Climate United said. The lawsuits argue that the program was legally approved and shouldn’t be shut down.

“EPA’s de facto suspension or termination of Climate United’s grant is arbitrary, capricious, and not in accordance with law,” Adam Unikowsky, a partner at Jenner & Block, wrote in the lawsuit filed Saturday in federal court in Washington, D.C. ​“EPA has offered no reasoned explanation for its action, which violates multiple statutes and regulations.”

Democrats oppose the decision, arguing cancelling the grants will hurt efforts to lower energy costs and protect the environment. Senator Sheldon Whitehouse criticised the move, saying, “Without evidence, Administrator Zeldin is escalating his attempts to unilaterally terminate congressionally authorised and contractually obligated funding that would lower energy costs, spur economic growth, and cut pollution.”

He accused the Trump administration of favouring fossil fuel companies, stating, “Zeldin’s actions will drive up energy costs, deepen our reliance on foreign oil, and worsen climate change.”

On the other hand, Zeldin defended the cancellation, saying, “The only way to reduce waste, increase oversight, and meet the law’s intent is by terminating these grants.”

Lena Moffitt, executive director of Evergreen Action, criticised the EPA’s decision, calling it a “lawless, desperate political stunt” before an expected court battle.

Moffitt warned that halting the Green Bank program would “raise energy costs for low-income households, stall job creation, and kill investments” in clean energy projects such as home upgrades, community solar, and small business initiatives.

The funding freeze has also left grant recipients struggling to operate. Climate United’s lawsuit states that after weeks without access to funds, the organisation is running out of cash for salaries, rent, and financial commitments. This situation, it argues, “erodes trust,” damages its reputation, and harms local organisations depending on its support.

“Our borrowers can’t draw funds, which means projects are stalled,” said a nonprofit representative who requested anonymity due to online threats against groups involved in the program.

Unlike traditional grants, the Greenhouse Gas Reduction Fund functions as a lending institution. The $20 billion was intended as loans, expecting repayment with interest. This model, inspired by green banks in 17 states, has successfully funded clean energy projects for over a decade, focusing on disadvantaged communities.

Why Green Bank Program was important?

As per the official website of EPA.gov, the Green Bank program was designed to accelerate clean energy investments by leveraging both public and private capital to support projects that reduce emissions. Unlike traditional grants, green banks function as lending institutions, offering loans and credit enhancements to businesses and communities for renewable energy and efficiency projects.

By focusing on underserved sectors, including low- and moderate-income (LMI) communities, green banks helped bridge financial gaps that private lenders often overlooked. They provided low-interest loans, risk mitigation for investors, and financial incentives to make clean energy projects more accessible and affordable.

According to EPA.gov, for every federal dollar invested, green banks could generate up to seven dollars in private investment, significantly amplifying the impact of public funds.

Successful examples, such as the Connecticut Green Bank and NY Green Bank, demonstrated how these programs lowered energy costs, created jobs, and reduced pollution. They funded projects like solar energy installations, energy efficiency upgrades, and clean transportation solutions. However, with the termination of the program, the progress made in expanding clean energy access—especially for disadvantaged communities—now faces uncertainty.

The EPA may face more lawsuits from affected groups. Meanwhile, the Biden administration and climate organisations are fighting to restore the funds. The decision aligns with President Trump’s efforts to cut climate-related programs. The future of the Green Bank program is uncertain due to ongoing legal battles.

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