Decc also announced it will stop any future funding releases of the Green Deal Home Improvement Fund.
By the end of June 2015, measures had been installed in around 10,000 properties using Green Deal finance, with an additional 5,600 Green Deal finance plans currently in progress.
The government confirmed the move will have “no impact” on existing plans or existing Green Deal Home Improvement Fund applications and vouchers.
In a statement, energy secretary Amber Rudd said: “We are on the side of hardworking families and businesses – which is why we cannot continue to fund the Green Deal. It’s now time for the building industry and consumer groups to work with us to make new policy and build a system that works.”
UK Green Building Council chief executive Julie Hirigoyen argued that the government’s strategy on dealing with high energy bills through home energy efficiency is now “dead in the water”.
“While the Green Deal was by no means perfect, the principle of enabling households to install energy saving measures without paying upfront costs was sound,” she said. “The irony is that the scheme was finally becoming established and the number of plans was growing.
“This is yet another announcement with no forewarning that will leave the energy efficiency industry battered and bruised.”
However, Which? executive director, Richard Lloyd, welcomed the move. he said: “The government can’t keep throwing money at a scheme that has spectacularly failed to take off.
“Ministers should now work with consumers to put together a realistic new approach that is genuinely good value and helps people to save money by saving energy.”
Decc has commissioned an independent review, led by business executive Peter Bonfield, to look at standards, consumer protection and enforcement of energy efficiency schemes and ensure that the system properly supports and protects consumers.
Current government policies, including the Energy Company Obligation (Eco) scheme, will continue to provide support this year to low-income and vulnerable households, Decc said. Eco has delivered 97 per cent of home improvements in the last two years.