A package of proposals on waste will be withdrawn and a new version submitted by the end of the year, the European commission confirmed yesterday.
The move had received widespread criticism from environment ministers, MEPs and environmental campaigners.
Last week, a majority of MEPs voted in favour of individual amendments opposing the withdrawal of the draft legislation, though they failed to agree on a joint resolution.
The commission says that the circular economy proposals will be replaced with a "new, more ambitious proposal" by the end of 2015. A spokesperson for the commission said: "There is fine-tuning to be made, but it remains an important piece of legislation - all member states agree that this idea of the circular economy is needed."
Jacob Hayler, executive director for waste trade body the Environmental Services Association (ESA) said: "This will delay the introduction of a clear policy framework beyond 2020 at European level, and the continuing uncertainty over future policy direction will discourage much-needed private sector investment in resource management infrastructure.
"Nevertheless ESA, and its European association FEAD, will continue to work closely with the commission, the parliament, and member states to help develop the 'more ambitious' circular economy package vice president Frans Timmermans has promised to re-table later this year," he said.
The new package should retain key elements of the existing proposals, while adding measures to prevent waste and strengthen the markets for recycled and recovered materials, he said.
Draft air quality legislation was also under threat of being dropped from the new commission's work programme. But Timmermans and environment commissioner Karmenu Vella have confirmed in meetings with the Conservative MEP and rapporteur on air quality, Julie Girling, that the commission will instead modify the proposals to improve synergy with the EU climate and energy package.