How do I window removeEventListener using React useEffect

You can put the handleKeyUp function inside of the function given to useEffect (which is the recommended way of doing it according to the official documentation) and only add the listener and return a cleanup function when collapsed is false.

useEffect(() => {
  if (collapsed) {
    return;
  }

  function handleKeyUp(event) {
    switch (event.key) {
      case "Escape":
        setCollapsed(true);
        break;
    }
  }

  window.addEventListener("keyup", handleKeyUp);
  return () => window.removeEventListener("keyup", handleKeyUp);
}, [collapsed]);