Beyond Federal Funding, What's Next for U.S. Climate Investments?

Lowering utility bills in rural communities by expanding access to clean energy. Replacing diesel trucks linked to asthma and other illnesses with zero-emission vehicles. Reducing air pollution at ports. These are just some of the programs put in limbo after incoming U.S. President Donald Trump put a sweeping freeze on federal funding in his first days in office. 

It's not unusual for some federal programs to be paused and reviewed under a new administration, but the broad language in Trump's executive orders left federal agencies — and the nonprofit organizations, state and local governments, and community groups that rely on federal funding — largely in the dark about what applies to them and what they should do next. 

Organizations from foreign-aid enterprises to community service charities are already feeling the impact of the funding freeze, even as legal challenges make their way through the courts. The future of the energy and climate provisions approved under the Joe Biden administration, which advocates called the largest climate investment in U.S. history, is also uncertain. 

Passed in 2021 and 2022, the Inflation Reduction Act, Chips and Science Act, and Infrastructure Investment and Jobs Act support dozens of new programs across the Environmental Protection Agency, Department of Energy, and other government agencies that aim to lower energy prices and pollution in communities across the country. Trump's executive order refers to "terminating the Green New Deal." But since the "Green New Deal" doesn't actually exist in U.S. legislation, agencies and funding recipients are left wondering which programs fall into the scope, said Trenton Allen, CEO and founder of the financial advisory firm Sustainable Capital Advisors, who worked with organizations to prepare their applications for grants under the Inflation Reduction Act.

"We've been in contact with clients of ours and others who are unsure of what it means for previously committed, legally executed contracts with the Department of Energy for funding," Allen said. "These are organizations who have planned, who may have paid for resources in advance of being able to bill for a contract under the Department of Energy, so it really calls into question the ability to have a partner in the federal government." 

Who is impacted by the federal funding freeze? A big question, with few answers 

Under the U.S. Constitution, Congress holds the "power of the purse," or the ultimate say in spending federal money. State and local governments and nonprofits impacted by the funding freezes have challenged them in court, arguing it is unconstitutional for the executive branch to halt the distribution of funds that were already approved by Congress. 

On Monday, U.S. District Judge John McConnell of Rhode Island ordered the federal government to “immediately restore frozen funding," after states said they still couldn't access funds following McConnell's previous order to release them at the end of January. "The Defendants now plea that they are just trying to root out fraud. But the freezes in effect now were a result of the broad categorical order, not a specific finding of possible fraud," McConnell wrote, with the Defendants in this case being the federal government. "The broad categorical and sweeping freeze of federal funds is, as the Court found, likely unconstitutional and has caused and continues to cause irreparable harm to a vast portion of this country."

Agencies in some states, including Washington, were able to access funds made available through the Inflation Reduction Act's Solar for All program following the judge's order, according to news reports. In other states like Nevada and Massachusetts, government officials and nonprofits saw the funding portals they use to access grant funding briefly open, only to be closed again. Solar for All awarded 60 grants to state and city agencies, tribal organizations, and nonprofits to create programs that bring access to solar energy to 900,000 low-income households across all 50 states. 

The mixed experiences reported in the news mirror what Allen and other advisors are hearing from their clients. "I've heard some Solar for All folks have access and some don't, but I don't know when they last went into the portal and under what circumstances," Allen said. "Part of the challenge is we may not know if the circumstances are exactly the same, so it's been difficult for us to understand all of the patterns."

Legal analysts predict continued confusion for agencies and funding recipients in the short term. “The directives related to funding pauses will likely be the subject of continued challenge and additional guidance in the coming weeks and months,” reads a recent analysis from the international law firm Mayer Brown.

"It's not comforting to anyone, but we'll know more in a week than we know today," Allen added. "It doesn't help you when people are potentially getting laid off. Organizations and employees are concerned about whether the jobs they think they have will be there. To me, what is a challenge is the unfair assumption that anyone who's working on climate or what is considered equity or DEI falls within a particular political spectrum. These are just Americans who are concerned with making sure that those who are under-resourced are getting access. I hope we can all just take a step back and say: How are we moving forward priorities to care for one another and support one another?"

A path forward for U.S. climate and energy programs 

Beyond Solar for All, programs tied to Biden-era legislation include grants to strengthen grid resilience against wildfires and build new energy transmission lines, along with the $20 billion Greenhouse Gas Reduction Fund to finance infrastructure projects that reduce emissions and air pollution. 

Allen worked with a number of organizations to prepare their applications for grant funding. "No entity received all the funding they requested," he said. "There was always a need to look to private sources of capital — philanthropic resources, impact investors, institutional investors and the like — to fill the gap. We were thinking about that irrespective of whoever was going to be elected president. You can't call it once-in-a-generation and then think you're going to get it next year." 

Though future federal funding is uncertain, Allen remains optimistic that grant recipients — from the green banks and financial institutions awarded grants under the Greenhouse Gas Reduction Fund, to the states and tribal entities that put applications forward to reduce energy prices in their communities — will find new financial streams that will allow them to move ahead. 

"There are ways we can be creative, particularly if these projects add value, meaning they reduce costs to consumers and provide a return to investors," he said. "There are ways to utilize what was provided through the Greenhouse Gas Reduction Fund and other types of funding to expand opportunities — and I'm excited today to go do that work. That's what we do. The mission has not changed. It's just now we know there is less money coming from the federal government." 

Though many of his clients are still in the dark about the federal funding they were due to receive, they haven't lost their resolve. "They're clear-eyed. They're saying, 'It's time to go get to work,'" Allen said. "New players, new structures and new opportunities will come up. When you've lived long enough, you've seen things. You're able to pull back from past experiences and recognize that we'll be able to continue on."

Organizations across the country are already finding ways to do just that. In the past two weeks alone, New York's green bank deployed $60 million in new investments to support electric vehicle charging, and Minnesota authorized its first green bank with the aim of lending $25 million annually to support clean energy projects in underserved markets. 

"Similar to what happened in the Trump administration the first time, where you started to see a lot of the actions shift back to the cities and states, the same thing is happening again," Allen said. "They recognize they are not going to see any resources at the federal level, but because local leaders are closer to the problem on a day-to-day basis, they can't afford to get caught up in what's happening in Washington. They know their constituents still need their help and their support. They still know resiliency is an economic development opportunity."

Even without federal support, the plans already put forward by states, cities and non-governmental organizations could reduce U.S. greenhouse gas emissions by 48 percent to 60 percent by 2035, according to a 2024 report from the ​​Center for Global Sustainability at the University of Maryland. "This highlights the impact that non-federal actors can still have despite uncertainties at the federal level," the report found. 

Reducing emissions comes with clear economic benefits. Beyond avoiding the heavy financial costs of unchecked climate change — which Vanguard estimates could amount to 10 percent of global GDP by 2050 — expanding access to renewable energy alone could lower energy prices by over $200 per person annually, adding up to billions in savings returned to ratepayers across the U.S, according to research from the World Resources Institute. 

Though organizations can do a great deal on their own, Allen said the delivery of previously committed funds is critical to maintain trust in the federal government — and he sees all Americans as watchdogs to make sure that happens. 

"All taxpayers need to do our best to ensure the commitments the federal government is making to one American or to one group are upheld," he said. "That's a really strong principle and something that I think gives the confidence for all Americans to believe in their government. Irrespective of party, irrespective of administration, we want to be able to count on the government to live up to what they've committed to do."