In a surprising move, Citibank has disclosed that the FBI, EPA, EPA Inspector General, and Treasury Department have requested the bank to freeze accounts of several nonprofits and state government agencies that received funding from the Greenhouse Gas Reduction Fund.

The fund, created by the Inflation Reduction Act of 2022, allocated $27 billion for green energy projects, with the EPA receiving $14 billion for the National Clean Investment Fund. This fund provides grants to green banks, which in turn offer financing for clean technology projects across the country. Startups with commercially viable technologies were eligible to receive funding to bring their projects to life.

Citibank, selected as the financial agent to administer the funds, held the money in accounts under the names of the awardees. The bank also administers a separate $6 billion Clean Communities Investment Accelerator program. The EPA's contract with Citibank was publicly announced in April 2024. However, in February, the FBI requested that Citibank place 30-day administrative freezes on accounts held by nonprofits that received green bank funding, as well as other nonprofit and state government agency accounts.

The list of affected organizations includes notable nonprofits such as Habitat for Humanity, United Way, the Colorado Clean Energy Fund, and New York State's Department of Taxation and Finance. Three nonprofits that received green bank funds have sued Citibank, demanding the release of the frozen funds.

EPA administrator Lee Zeldin has expressed concerns about fraud, stating that the Greenhouse Gas Reduction Fund doesn't align with the agency's priorities. However, Zeldin has not provided evidence to support his claims. The move has raised questions about the motivations behind the account freezes and the potential impact on the green energy sector.

The Greenhouse Gas Reduction Fund was designed to provide financing for clean technology projects, with a focus on loans that would be paid back and recycled for future lending. Green banks typically have delinquency rates comparable to commercial and residential portfolios held by other commercial lenders. The freeze on accounts has sparked concerns about the future of these projects and the ability of startups to access funding for their initiatives.

The development has significant implications for the green energy sector, which has been a key focus area for the US government in recent years. The Inflation Reduction Act was hailed as a landmark legislation aimed at reducing the country's carbon footprint, and the Greenhouse Gas Reduction Fund was a critical component of that effort. The FBI's investigation and the EPA's concerns about fraud have cast a shadow over the program, raising questions about its future and the potential consequences for startups and organizations relying on this funding.

As the situation unfolds, it remains to be seen how the account freezes will impact the green energy sector and the startups that have come to rely on this funding. One thing is clear, however: the FBI's investigation and the EPA's concerns have brought a sense of uncertainty to an industry that was once seen as a beacon of hope for a sustainable future.