Yes, limonene is a terpene and terpenes react with ozone to form formaldehyde and other micro-particle pollutants. Limonene itself isn’t toxic and hasn’t been found to be harmful, but some people are sensitive to it’s various oxidation products causing skin irriation or respiratory problems.
Research has shown that:
when people use the [terpene-based cleaning] products under ordinary circumstances, their exposure to ethylene-based glycol ethers, formaldehyde and fine particles will normally not reach guideline values (source)
However the same study also says that under certain circumstances it is possible that levels of formaldehyde or microparticles exceed legal limits. Examples of such circumstances are:
- using ozone-generating devices in combination with terpene-based air fresheners
- being a professional cleaner with prolonged contact to (reactants of) terpene products
- being exposed to other sources emitting formaldehyde (e.g. building materials, some furniture, glues, burning wood or gas).
- bad ventilation
Apparently many daycare-centers in California were found to have levels of formaldehyde above the state's legal limit, but I’m not sure how strict Californian guidelines are. AFAIK there haven’t been studies on how harmful this is.
As to why exactly EWG placed the mentioned product on their Hall of Shame 'Greenwashing' list, my guess is that it is because of the rather high level of d-limonene.