Author: Jeff St. John Published: 01/21/2025 Canary Media
The pause throws tens of billions of dollars of lawfully designated clean energy funding into uncertainty. It’s likely to face challenges in court.
The Trump administration has ordered federal agencies to “immediately pause the disbursement of funds” under the landmark federal climate and energy laws passed during the Biden administration, a move that will throw tens of billions of dollars of lawfully designated federal funding into limbo — and one that is likely to be challenged in court.
The pause on disbursing funds appropriated through the Inflation Reduction Act and the Bipartisan Infrastructure Law is laid out in a section of a broader executive order on “Unleashing American Energy,” entitled “Terminating the Green New Deal.”
Donald Trump has adopted the “Green New Deal” moniker for a slew of energy and climate policies he opposes, including the hundreds of billions of dollars in tax credits, grants, and incentives for clean energy, electric vehicles, and programs to reduce climate and environmental pollution.
The order calls on federal agencies to halt all disbursements under the two laws while they “review their processes, policies, and programs for issuing grants, loans, contracts, or any other financial disbursements of such appropriated funds for consistency with the law.” It gives federal agencies 90 days to report to the director of the Office of Management and Budget and the head of the National Economic Council on how the frozen spending aligns with the administration’s overall energy goals.
The pause is part of a blitz of executive orders issued in the first hours after Trump took power on Monday. They include energy-related executive actions such as withdrawing the U.S. from the Paris climate agreement, halting all federal permitting of wind power projects, stripping away barriers to developing and exporting domestically produced fossil fuel resources, and ending policies to support electric vehicles.
Incoming administrations often call for temporary freezes and reviews of federal agency actions ordered by their predecessors. But it is far less common for executive orders to make federal agencies halt spending on programs mandated in laws passed by Congress.
The order is likely to cause significant confusion for the many government entities and private-sector companies that have been awarded funds, Alex Kania, director of equity research at Marathon Capital, an investment banking firm focused on clean infrastructure, wrote in a Tuesday research note.
“This would obviously stop any unappropriated funding, but the halt on any disbursement suggests a broader move, such as stopping payment of funds that had already been approved and previously contracted,” Kania wrote. “Bottom line, these executive orders inject a lot of uncertainty into federal clean energy policy, and a turn to the courts seems likely.”
Kania noted that the executive order is unlikely to impact tax credits created by the Inflation Reduction Act.
Tax credits — not loans, grants, and contracts — make up the majority of the hundreds of billions in federal spending expected to flow from the Inflation Reduction Act, which Trump has called for rescinding entirely. But Republicans in Congress and many industry groups have warned that ending the tax credits would undermine the economic development and job growth the incentives have spurred largely in Republican districts.
Still, the spending freeze could impact several crucial clean energy and decarbonization programs.
“Donald Trump wants to slam the door on the lifeline that has created hundreds of thousands of jobs, is upgrading the country’s infrastructure, and brought about the rebirth of American manufacturing,” Sierra Club Executive Director Ben Jealous said in a Tuesday statement.
Industry observers have been expecting the Trump administration to halt spending that federal agencies have yet to allocate, but the text of the executive order leaves unclear whether the freeze will also target spending that has already been “obligated,” or legally committed under contract. A Biden administration official told reporters on Friday that $96.7 billion in clean energy grants, or about 84 percent of grant funding from the Inflation Reduction Act, has been obligated.
That includes tens of billions in loans and loan guarantees issued by the Department of Energy’s Loan Programs Office, which under the Biden administration supported electric-vehicle and battery factories, battery-mineral mining, processing, and recycling facilities, distributed solar and battery deployments, EV-charging projects, alternative aviation fuel operations, clean hydrogen production plants, and nuclear reactors. Of the approximately $107.57 billion Biden’s LPO awarded across across 53 deals, just under $60.62 billion consists of loans and guarantees that have been finalized and obligated, according to a Friday update from the DOE.
Obligated funding also includes the $27 billion for so-called “green bank” programs created by the Inflation Reduction Act, which help fund climate projects that struggle to secure private-sector loans; about $3 billion of a $5 billion grant program for electric and zero-emissions school buses; and around $5 billion in Climate Pollution Reduction Grants for states, local governments, tribes, and territories to finance plans to reduce greenhouse gas emissions and air pollution.
Other grant-funded projects at risk include the Bipartisan Infrastructure Law’s $7 billion clean hydrogen hub program, for which only a fraction has been obligated, and the more than $22 billion in grants to fund power grid projects across the country, of which more than $10 billion has been awarded to utilities, companies, and state, local, and tribal governments but just a smaller slice has been obligated. Only portions of the IRA’s $8.8 billion in home-efficiency and electrification rebates and incentives and a $9.5 billion rural electrification program have been obligated.
The executive order also singles out for immediate pause the $7.5 billion in EV-charging infrastructure grants created by the Bipartisan Infrastructure Law.
Of the $5 billion segment of those grants earmarked for large charging hubs along major highways and transit corridors, “my guess is about two-thirds of those are under contract with states,” said Loren McDonald, chief analyst of EV-charging data firm Paren. “And I would assume that those that are under contract could not be clawed back. How could you basically promise money for an applicant, they start construction, and then you pull it back?”
And in general, analysts say it would be difficult for Trump to undo obligated awards made by the Biden administration.
Pavel Molchanov, managing director and equity research analyst at Raymond James & Associates, told Canary Media that “any attempt to cancel — that is to say, renege on — previously approved loans or grants,” as would be the case for freezing spending on obligated funds, “would immediately lead to lawsuits from the companies involved.” While the new administration can prevent future loans or grants from being authorized, “that is not the same thing as canceling existing ones.”
It remains unclear how the Office of Management and Budget and the National Economic Council will manage the process of reviewing the agency reports mandated under the executive order.
Much depends on how the Trump administration instructs these offices to interpret the executive order’s broad language. The order states, “No funds … shall be disbursed by a given agency until the Director of OMB and Assistant to the President for Economic Policy have determined that such disbursements are consistent with any review recommendations they have chosen to adopt.”
Russell Vought, Trump’s new OMB head, has argued that presidents can choose to withhold federal funds appropriated by Congress through a process called “impoundment.” That argument challenges the constitutionality of a law passed in 1974 barring the president from interfering with Congress’s constitutionally defined power over taxing and spending.
Rob Gramlich, president of power-grid consultancy Grid Strategies, noted in a Tuesday social media post that a federal agency “has the power to not do discretionary grants, and appointees will certainly want to follow” the executive order on that front. However, many of the grant programs created by the two laws are structured as mandatory grants, and “stopping mandatory grants would be in the legal territory of the impoundment law which requires that the [money] is spent,” he wrote — unless, he added, the U.S. Supreme Court “says otherwise.”
Kania noted that if federal agencies are forced to halt disbursement of mandatory grants and funds already obligated, that “has broad implications on the overall Constitutional balance of executive authority relative to Congressional funding direction.”
OMB did not immediately respond to Canary Media’s request for comment.
Jeff St. John is director of news and special projects at Canary Media. He covers innovative grid technologies, rooftop solar and batteries, clean hydrogen, EV charging, and more.