Responding to the reports of a potential U-turn by Cameron, industry players warned that the Green Deal policy would struggle to attract participants without some form of mandatory rules, warning that the scheme could result in a decline in the number of homes being insulated when it replaces existing insulation schemes in the autumn.
The UK Green Building Council agreed that scrapping consequential improvements rules would make it significantly more difficult for the Green Deal to succeed in its goal of cutting the UK's carbon dioxide emissions by 130 million tonnes while saving more than £700m to the economy through reduced energy bills.
When it launched the consultation in January, the department had been enthusiastic, saying a typical home could save as much as £150 a year.
About 45 per cent of UK carbon dioxide emissions come from buildings, principally space heating and cooling, water heating, lighting and other fixed systems - energy uses which are covered by the building regulations.
About 200,000 domestic extensions, loft conversions and integral garage conversions are carried out per year. These are works which generally result in increased energy use and carbon emissions from the home so the ruling would help mitigate this impact.
"This is another U-turn that shows once and for all that a majority of ministers in this Government have no backbone on green issues, even when they save people money, and are good for the economy," he said.
"Government has a responsibility to look beyond the ludicrous media headlines. This policy would have helped protect ordinary people from soaring energy costs, as well as reduce carbon emissions to meet its own supposedly legally binding carbon budgets. It was also the best tool in the box for driving forward the Green Deal."
However, any watering down of the proposals is likely to be interpreted as a major blow to both Govt plans for the Green Deal and the Liberal Democrat ministers who have been pushing for mandatory rules to support the scheme.