The future of two of the UK’s most controversial oil and gas projects has been thrown into doubt, after the energy secretary, Ed Miliband, withdrew government support for the companies in two legal cases brought by campaigners.

The Jackdaw gasfield, operated by Shell, was given approval in 2022, and Greenpeace applied for a judicial review shortly after the decision. Last year, the previous Conservative government gave the green light to Equinor-operated Rosebank, the UK’s biggest untapped oilfield, against the recommendation of climate advisers. Greenpeace and Uplift demanded a judicial review, arguing that the approval was incompatible with the UK’s legally binding climate commitments, and saying that ministers’ original analysis ignored the devastating impact of burning oil from the site.

In June, the cases against the oil and gasfields received a boost when the supreme court ruled in a separate case that “scope 3” emissions – that is, the burning of fossil fuels rather than just the building of the infrastructure to do so – should be taken into account when approving projects.

The previous government said it would “robustly defend” these cases, but Miliband’s Department for Energy Security and Net Zero on Wednesday announced it would not challenge the judicial reviews brought against development consent for the Jackdaw and Rosebank offshore North Sea oil and gasfields, saying it was to “save the taxpayer money”.

Miliband announced it would consult on new guidance for oil and gasfields in light of the supreme court ruling.

Another of the department’s ministers, Michael Shanks, said: “We were elected with a mandate to deliver stability, certainty and growth. Every action we take will be in pursuit of that. We will consult at pace on new guidance that takes into account the supreme court’s ruling on environmental impact assessments, to enable the industry to plan, secure jobs and invest in our economy.”

Campaigners celebrated the move. Tessa Khan, the executive director of Uplift, said: “We welcome this announcement by the government not to defend the case against Rosebank, the approval of which by the last government was unlawful.

“This government has rightly accepted that this huge oilfield cannot proceed without the full extent of the damage it will do to our climate being taken into account. It is astonishing that the massive emissions from burning oil and gas have been overlooked by decision-makers till now.

“This government is right not to waste time and money trying to defend the indefensible. It’s now up to the Scottish courts to decide if Rosebank’s approval was unlawful.”

Mel Evans, the Greenpeace UK climate team leader, added: “The two new fields combined would generate a vast amount of emissions while doing nothing to lower energy bills.

“The only real winners from giving them the greenlight would be multibillion-pound oil giants. Shell and Equinor should respect the supreme court’s decision and the government’s position that their permits are illegal, and not waste time and money in greedy tactical legal battles.

“The government must now make sure they prioritise public investment to support green jobs growth, that workers affected will be properly supported, and that the funding is ringfenced for them to switch or retrain into sustainable jobs in renewable energy.

“Right now the sector continues to employ workers on insecure contracts because they know the North Sea oil sector is in decline. Climate justice and worker justice must go hand in hand, and it must always be prioritised over the profits of fossil fuel companies.”

The shadow energy secretary, Claire Coutinho, said the government’s decision was “the final blow for the North Sea”, adding: “No other major economy is taking this approach to its domestic energy supply.”

A Shell spokesperson said: “Jackdaw was approved in 2022 and we are carefully considering the implications of today’s announcement by the government.

“We believe the Jackdaw field remains an important development for the UK, providing fuel to heat 1.4m homes and supporting energy security, as other older gasfields reach the end of production.”

An Equinor spokesperson said: “Equinor welcomed regulatory approvals for the Rosebank development in 2023. We’re currently assessing the implications of today’s announcement and will maintain close collaboration with all relevant stakeholders to advance the project. Rosebank is a vital project for the UK and is bringing benefits in terms of investment, job creation and energy security.”

The government’s move emerged after a senior Equinor executive cast doubt on the fate of its multibillion-pound investments in the UK, including the Rosebank oilfield, if the new government followed through on plans to increase taxes on the sector.

Equinor and Ithaca Energy, a smaller North Sea oil company, said in September that they would invest $3.8bn (£2.9bn) in developing Rosebank, which lies 80 miles north-west of Shetland.

But Philippe François Mathieu, who leads oil exploration and production for Equinor outside its home country of Norway, told journalists on the sidelines of an oil fair in Stavanger on Wednesday that the UK might no longer be an attractive proposition for the company.

“We need to look at the appetite to invest further in the UK based on the fiscal regime … It could be that the economics are really, really [negatively] impacted,” Mathieu said.

Labour’s manifesto said that “oil and gas production in the North Sea will be with us for decades to come”, but that it would fund new energy investments by closing “loopholes in the windfall tax on oil and gas companies”. This will involve a three-percentage-point hike to the existing North Sea windfall tax which was put in place after the energy market crisis triggered by Russia’s invasion of Ukraine.