The government made a major U-turn on plans to fast-track UK fracking on Monday after accepting Labour proposals to tighten environmental regulations.

David Cameron had previously said the government was “going all out” for shale gas development, but widespread public concern and a looming defeat by worried Tory and Liberal Democrat backbenchers forced ministers to back down.

The Guardian revealed on Monday that George Osborne, the chancellor, was demanding “rapid progress” from cabinet ministers, including delivering the “asks” of fracking company Cuadrilla.

But the changes accepted by ministers would ban fracking in national parks, areas of outstanding natural beauty and in areas where drinking water is collected, ruling out significant regions of the UK’s shale gas deposits. The new regulations will slow down exploration by, for example, requiring a year of background monitoring before drilling can begin.

However, an attempt to impose a moratorium on shale gas exploration, as recommended by a report from MPs, including former Conservative environment secretary Caroline Spelman, was defeated after Labour abstained. The infrastructure bill, which contains the new rules for fracking, now goes to the House of Lords, where further changes could be made.

“This is a huge U-turn by the government and big victory for the protection of Britain’s environment,” said Caroline Flint, the shadow energy and climate change secretary.

“Labour has always said shale gas extraction cannot go ahead unless there is a system of robust regulation and comprehensive inspection, but David Cameron has repeatedly ignored people’s genuine and legitimate environmental concerns over shale gas.”

Labour did not oppose the change to trespass laws, which allow fracking under people’s home without their permission

A government spokesman said: “Successfully extracting shale gas can create a new British industry, creating jobs and make us less reliant on imports, but we recognise the need for a measured approach for this nascent industry.”

Donna Hume, from Friends of the Earth, said: “Public opinion and increasing concern from MPs has forced the government into retreat on fracking. Everywhere fracking is proposed, local communities say no.” Hundred of protesters gathered outside parliament earlier on Monday as the issue was discussed and 360,000 people signed a petition opposing government plans.

“But these concessions do not go far enough,” said Hume. “The only way to safeguard our climate, local communities and their environment from the fracking threat is to halt shale gas completely.”

Green party MP Caroline Lucas, one of the MPs who wrote the environment audit committee’s report that backed a moratorium, said the Commons debate was farcical after discussion of dozens of amendments was confined to two hours.

She criticised the Labour amendments as weak. “When it came to a freeze on fracking, Labour abstained. Instead they served up their own superficial tweaks, lacking in detail and riddled with loopholes,” she said. “The strength of public feeling on this issue is palpable and I think it’s intensified still further in the face of the astonishing lack of transparency and lack of regard for the views of voters. People won’t be silenced on this.”

The shale gas industry welcomed the rejection of a moratorium. Ken Cronin, chief executive of industry group UK Onshore Oil and Gas, said: “It is good news that MPs have rejected the misguided attempts to introduce a moratorium. Most of the amendments agreed are in line with best practice in the industry or codify the directions of regulators, which the industry would naturally comply with. We now need to get on with exploratory drilling to find out the extent of the UK’s reserves.”

The 13 Labour changes accepted by ministers included independent inspection of the integrity of wells, monitoring for leaks of methane and informing residents individually of fracking in their area. The government proposal to allow “any substance” to be used in fracking wells was also overturned.Climate change minister Amber Rudd committed the government to cancelling shale gas licences if their official advisers, the Committee on Climate Change, concluded that shale gas would damage climate change goals or make a written statement to parliament explaining the reasons for not doing so. But she refused to release in full a heavily redacted government report on the impact of fracking on the rural economy, claiming it could “mislead” the public.