In the weeks between the election and the inauguration, many in clean energy relied on one comforting assumption: that, despite the bluster of the campaign trail, rolling back Inflation Reduction Act programs wasn’t going to be on Trump’s day one agenda.
As it turns out, that was wishful thinking.
The Unleashing American Energy executive order, signed Monday afternoon, orders federal agencies to “immediately pause” the disbursement of funds appropriated through the IRA or the Bipartisan Infrastructure Law. The pause, which gives agencies 90 days to review their processes and submit reports, appears to apply to billions of dollars of both allocated funds — grants, loans, and prizes that have signed contracts — and unallocated funds.
A next-day memo from the Office of Management and Budget seemingly clarified that the types of projects favored by the Trump administration, like oil and gas, hydropower, biofuels, critical minerals, and nuclear energy, would move quickly through a review. All EV-related grants, like those supporting the rollout of charging infrastructure and battery manufacturing, plus renewable energy-related projects, are likely to be put on hold.
The pause, though not particularly long, creates immense uncertainty for a large swath of funding recipients, particularly those who haven’t yet signed an official contract with the government. And as a result, both recipients and the lawmakers who wrote the laws in the first place have already responded with frustration.
However, while lawsuits are already piling up against other executive orders — particularly the order attempting to end the constitutional right to birthright citizenship — Trump’s IRA funding pause is unlikely to draw any such challenges, at least in the near-term.
That’s in part because, optics aside, it’s actually pretty standard for an incoming administration to take some time to review the processes put in place by a prior administration, explained John Lushetsky, senior vice president of ML Strategies, a subsidiary of Mintz Levin.
“In some ways this should not be a surprise,” said Lushetsky, who previously served as senior advisor to the director of the Loan Programs Office. It “threads a needle” between campaign trail promises and the stated plan from congressional Republicans to take “a scalpel and not a sledgehammer” to the IRA, he added.
“This is the administration’s expression of that scalpel,” he said.
The relatively ambiguous language in the executive order is likely intentional, added Romany Webb, who leads Columbia Law School’s Sabin Center for Climate Change Law. The temporary nature of the review period will likely constrain the range of legal options grantees would consider pursuing, she said.
“It’s a pause, and it’s stated in the executive order as being temporary,” she added. “That does not of course mean that it won’t be damaging, and it could have all sorts of implications for people who are trying to get projects up and running…but I do think the fact that it is a pause may affect the way that grantees respond.”
This is the administration’s expression of that scalpel.
As long as the pause really is just 90 days, Lushetsky added, there isn’t really any legal precedent for recipients to consult, because that timeline “doesn’t touch any statutory trip wires.” It “checks a box” in terms of promises to pursue government efficiency and correct procedure, he added, “but it does not trigger some of the alarm bells, both legally and politically, that might occur if they took further actions.”
That said, if the pause is extended beyond 90 days, or if there are further, more concrete efforts to cancel allocated funding, “all bets are off.”
Beyond 90 days
Last week, the White House reported that about 84% of grants created by the IRA have been “obligated.” That’s around $96.7 billion dollars.
For most projects receiving some form of IRA funding, Lushetsky said, a 60 to 90 day delay in a disbursement isn’t going to cause the project to be scrapped. As long as developers believe they can go back to “business as usual” after the pause, even with potential changes in reporting requirements, he added, “I think folks can live with that.”
Webb said that legal challenges are more likely to crop up if the administration ultimately moves to claw back contracted funds by terminating award agreements.
“Those award agreements are legally binding contracts, and like all contracts they do include termination provisions,” she explained, adding that they typically outline a few circumstances in which an agency can terminate an agreement, including a breach of contract by the awardee. “I would expect the Trump administration to be conducting a lot of audits, looking for things that might signal that the awardee is in breach, and therefore give them the ability to terminate.”
Another pathway the administration might try to pursue to cancel contracts is a provision in award agreements that allows federal agencies to terminate agreements based on “changing priorities.”
But while that may sound like very broad authority, it’s a little bit more complicated, Webb said: “Courts have interpreted [the clause] relatively narrowly, and said that as long as an award is furthering the purposes for which Congress enacted the program, then you can’t terminate it just because a new administration has different priorities.”
That said, it’s possible the Trump administration will put that precedent to the test, withholding awards to wind and solar projects, for example, and letting the courts weigh in after as to the reach of the changing priorities clause.
“Obviously in the current landscape, it’s difficult to predict the outcome,” Webb added.
Unallocated funds
For funding recipients who haven’t yet reached the final obligation stage — even those who have been selected for an award but don’t have a signed contract — the outlook is gloomier.
Lushetsky said Mintz is advising their clients who are still in the funding pipeline not to expect movement anytime soon. “And frankly, your award is at risk because those funds are not obligations with the federal government,” he added.
Assuming IRA funding itself isn’t redirected by an act of Congress — which would be a much taller order — unallocated dollars under those programs may just not be spent. “It seems likely that the Trump administration would just sit on its hands,” Webb said.
Now, a decision not to spend certain funds would technically be illegal, because the IRA created “mandatory spending obligations,” that require agencies to spend allocated money on specific programs.
But there are a few catches. The deadline to spend most of the IRA funds is late 2031, meaning legal challenges accusing the administration of withholding funds couldn’t be brought until after that deadline passes. “So unless there’s some action by the Trump administration to signal that it’s not going to hand out those funds…that’s a potential big limit,” Webb said.
Then there’s the Impoundment Control Act, a 1974 law that regulates the president’s ability to withhold or delay spending of congressionally appropriated funds. Under that law, Trump would need congressional approval to officially hold back IRA dollars.
But that law, which was passed in response to President Richard Nixon’s refusal to release funds for certain programs, has already come under scrutiny by the Trump administration, Webb said. (In his first term, the Government Accountability Office found that Trump violated the act by withholding military aid to Ukraine.)
“On the campaign trail and during the transition period, various Trump staffers had argued that the Impoundment Control Act is actually unconstitutional, and that the president can actually withhold funds without any need for congressional approval,” Webb explained. “There’s a whole lot more activity that’s going to happen there, and I would not be at all surprised if we see a challenge to the constitutionality of that act going up to the Supreme Court.”
