Humza Yousaf has admitted the deposit return scheme could be scrapped if the UK Government does not U-turn on its decision to exclude glass from the plans.
The First Minister said today his government was looking at options on how the scheme can progress without damaging businesses.
But the plug could be pulled on the flagship recycling initiative if a workable alternative is not found.
The DRS was due to begin in March next but Holyrood was first forced to seek an exemption from the UK Internal Market Act.
The UK Government last week insisted the Scottish scheme does not include glass so it matches the initiative in England due to begin in 2025.
Yousaf said excluding glass could be at the "severe detriment" to Scottish brands like Irn-Bru and Tennent’s.
Speaking during a visit to Falkirk today, he said: "The choice that we are faced with is either to concede to the UK Government’s unreasonable demands as part of their attempt not just to torpedo the DRS, but frankly to undermine devolution.
"That would be to exclude glass, but to do so may well be at the severe detriment of businesses in Scotland.”
The First Minister claimed it was part of an attempt by the Conservatives to “destroy” devolution in their final “12 to 18 months” in government ahead of a general election next year.
Yousaf added: "We’ve got to give that consideration if we progress without glass, and if it’s going to harm Scottish business in that way, then yes another choice is not to proceed with the scheme, which would be hugely disappointing given that the (Scottish) Parliament of course voted for the scheme and voted for these regulations.”
Lorna Slater, the Green minister responsible for the scheme, had earlier said the Scottish Government needed to “quickly re-evaluate” whether the plans can go ahead.
She said: “We’ve hit a real roadblock with the UK Government, at this very late hour, changing their minds and saying we can’t have glass in the system when businesses all over Scotland have put in already the investment to having glass in the system.
“We now need to re-evaluate, talk to all the businesses in Scotland who have made this investment and figure out how we go forward from here.”
Asked if the UK Government’s decision presents “insurmountable” problems for the scheme in Scotland, she conceded: “This is the question we need to work with Scottish businesses to find out, is it insurmountable?
“We have to rerun all the numbers very quickly, look at what investment has been made and see if we can move forward.
“A deposit return scheme is the right thing to do but Westminster really has thrown a spanner in the works and tried to sabotage the system, and we are going to have to see if what they have left us is viable.”
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