Attacks on Greenhouse Gas Reduction Fund Are Misguided and Misleading

EPA Administrator Lee Zeldin has made clear his intention to claw back the majority of funding in the Greenhouse Gas Reduction Fund (GGRF), a $27 billion fund created through the Inflation Reduction Act (IRA) that expands loan financing and other support for clean energy projects in low-income communities. Administrator Zeldin’s criticisms reflect a misunderstanding of the intent of the program, and the Administration’s actions risk undermining GGRF’s progress toward healthier, safer communities across the country.

Zeldin has called for the termination of GGRF’s financial agent agreement, which allows an independent financial institution to hold federal grant funds in accounts on behalf of the grantees, and for the return of those funds to the EPA. Zeldin claims that this would allow the agency to more closely monitor fraud, waste, and abuse by directly overseeing the distribution of grant funding. But this view is inconsistent with the EPA’s statutory requirements under the IRA and disregards the oversight power the agency retains under the financial agent agreement.

The IRA required the EPA to disburse all GGRF grants by September 30, 2024. To do this, the EPA set up a financial agent agreement for most of the GGRF funding; under this agreement, a private bank holds the funds on behalf of grantees, who can draw down amounts over time to finance clean energy investments. Thus, the funds subject to the financial agent agreement have been obligated, a legal status that generally prevents an agency from taking back awards without a breach of contract.

Still, after Zeldin called for the agreement’s termination, several GGRF grantees reportedly lost access to their accounts, and the program’s director — a longtime civil servant — was placed on administrative leave. Late last week, the Washington Post reported that the FBI had initiated a criminal probe into the program, despite a career federal prosecutor claiming that the Administration had not produced evidence of criminal wrongdoing.

These actions pose real risks to climate investments across the country, even if account access is eventually restored and the financial agent agreement remains in place. Temporary delays and threats to funding will likely create market disruption and potentially upend GGRF’s promising momentum so far.

Here’s what to know about GGRF — and why threats to claw back funding are misguided:

• GGRF is a transformative federal investment in climate justice. Clean energy projects, particularly in low-income communities, often struggle to obtain financing in traditional credit markets. This can be due to small project sizes, reliance on newer technologies, or longer payoff periods compared to traditional energy projects. GGRF expands the availability of upfront capital, including loans and grants, to help level the playing field for these projects.
• Funding is split between three distinct, but related, competitive grant programs. Two of these programs — the National Clean Investment Fund (NCIF) and the Clean Communities Investment Accelerator (CCIA) — are the subject of Zeldin’s clawback threat. (The third program, Solar for All, operates somewhat differently but faces its own set of threats, as it was subject to the Trump Administration’s initial set of unlawful funding freezes; NCIF and CCIA were not.)

• GGRF’s design ensures that investments are driven locally by the people who understand their communities best. Under NCIF and CCIA, the EPA awarded $20 billion in grants to intermediary entities, including green banks, other mission-oriented lenders, and nonprofit financing coalitions. The program is designed to have these entities, not the EPA itself, use GGRF funds to capitalize clean energy projects — either by making loans and other financing tools directly available to clean energy project developers or by making awards to other intermediary entities that can provide such financing.

  The recipients of GGRF grants have years of experience making high-impact clean energy and economic development investments. They also have strong relationships with local lenders and an understanding of market needs. These local lenders are often more accessible to underinvested communities and are ultimately better suited than the federal government to making decisions about critical clean energy investments from GGRF. Not only does this engage local entities on the ground and encourage private investment, but it ensures that these investments reach disadvantaged communities that have been historically excluded.

• Financial agent agreements are not an attempt to circumvent oversight, as Zeldin argues. Such agreements have been used by federal agencies under both Republican and Democratic administrations for over a century. In this case, the EPA’s agreement was designed to give it significant continuing oversight over GGRF grants and transactions — including the ability to audit grant recipients and freeze their accounts if there is evidence of fraud. It also facilitates the distribution of funds to grantees’ balance sheets so they can efficiently provide financing for clean energy projects.

Like the Trump Administration’s broader efforts to freeze federal climate-related grant and loan programs, Administrator Zeldin’s plans for GGRF would pose real harm to clean energy projects and to the communities and households who would benefit from them. Threatening funding clawbacks and pausing funds, even if access is later restored, creates market uncertainty and could limit lenders’ willingness to provide upfront capital for clean energy projects or raise the cost of such financing, which would be a significant setback to progress on reducing dangerous climate pollution. This would likely be most harmful for smaller projects in low-income communities, who have historically faced the greatest burdens in obtaining private financing and thus stand to benefit most from these projects.