California Sues Trump Administration Over $2.7 Billion in Canceled Clean Energy Funding

California, leading a coalition of 13 states, has filed a lawsuit against the Trump administration for terminating approximately $2.7 billion in federal funding for clean energy projects. The lawsuit, filed in the U.S. District Court for the Northern District of California on February 18, 2026, challenges the actions of the U.S. Department of Energy and the Office of Management and Budget, alleging that the cuts represent “partisan retribution” and violate the constitutional separation of powers. This marks California’s 58th lawsuit against the current presidential administration since it resumed office last year.

Funding Cuts and Project Impacts

The rescinded funding includes $1.2 billion allocated for California’s Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES) project, a major initiative aimed at developing clean hydrogen technology. An additional $4 million was cut from the Resilient and Efficient Codes Implementation (RECI) program, which supports energy-efficient building codes within the state. The broader cuts affected programs funded through the Inflation Reduction Act and the Bipartisan Infrastructure Law across multiple states.

According to California Attorney General Rob Bonta, the funding cuts jeopardize over 200,000 union jobs, could lead to higher energy prices, and will worsen air pollution. Governor Gavin Newsom stated the terminated programs were projected to save an estimated $3 billion annually in health costs related to air pollution.

Legal Arguments and Allegations

The lawsuit asserts that the Trump administration’s actions illegally circumvented Congress, as the funding had been approved by bipartisan majorities. It further alleges violations of the Administrative Procedure Act, which mandates fair and transparent procedures for government agencies when making regulatory and decisional changes. The states are seeking a court order declaring the administration’s actions unlawful and preventing further interference with the programs.

Administration’s Justification and Prior Actions

The Office of Management and Budget, under Director Russell Vought, announced in October 2025 the termination of over $7.5 billion in grant funding deemed part of a “Green New Scam,” impacting 16 states that did not vote for Trump in the 2024 presidential election. The Department of Energy followed suit, sending termination letters to awardees, citing concerns that projects did not adequately advance national energy needs or offer a positive return on investment.

President Trump had previously issued executive orders declaring a “national energy emergency” and signaled his intent to cut programs favored by Democrats as a response to potential government shutdowns.

Broader Economic and Environmental Concerns

The lawsuit highlights concerns about the potential loss of clean energy jobs and the erosion of the United States’ global competitiveness in the clean energy sector. Climate Power, a nonprofit organization, estimates that over 165,000 jobs in the clean energy sector have been lost or delayed since Trump’s election. Residential electric bills nationwide increased approximately 12% in 2025, rising from 15.9 cents per kilowatt hour in January to 17.8 cents by the end of November, according to data from the U.S. Energy Information Administration.

Governor Newsom emphasized that California will continue to fight for these jobs, the necessary infrastructure, and its position in the global clean energy market, asserting that the Trump administration has ceded leadership to China in this critical area.