This sounds very like my DB who had an episode of cannabis enduced psychosis in his mid 20s and has never worked since. I was also wayward in my first year of college and made it to Uni etc.
He needed guidance, structure and discipline not more freedom or money.
This is a really tough time. Please don't compare your children to each other. This is not a failing on your part.
I would sit him down and have a chat. I have found it really helpful in difficult situations to have a set of questions.
Can he describe what has been going om?
Who does he think this is affecting and how?
What do you think and feel?
What is the most difficult thing here for you?
What could he do to improve things?
What do you need?
Talk about what he wants to do with his future.
It does matter if he messes this year up. However there are options. I retook the year to improve my grades. He could change courses and do something vocational. Far better you guide him so he has something he can fall back on, if mental health is going to blight him in life.
Here are some links to talking to your child about drugs.
www.nhs.uk/live-well/healthy-body/talking-about-drugs-with-your-child/
www.nhs.uk/live-well/healthy-body/cannabis-the-facts/
I think the main message is that cannabis can cause mental health problems. Risk of addiction is higher in teens. There are more stronger types of cannabis in circulation today. It can affect fertility etc.
If he wants to stop a trip CBT is probably the best bet. This link has more information and treatment options.
www.ukat.co.uk/drugs/cannabis/
Not only would he get a dopamine hit from drugs, he would also get a dopamine hit from being with these so-called mates. He now needs to be checking in with you daily, contributing around the house. I would stop giving him any physical money whatsoever, or the bare minimum. Travel tickets can be bought in advance. Lunches can be made beforehand. Stop the driving lesson money. These can be purchased directly. Gifts from relatives are okay, not money. Any extra for him has to come from him getting a part time job.
It sounds like he has you on egg shells but as the counsellor says he is no longer in crisis, I think that is fine. Keep the counselling going while you take a firmer stance. He can moan to them.
Please know there is no shame in this.
With regards self-esteem, this is a really tough time for him. Open lines of communication, rather than criticism. Encouraging him to look after himself, maybe he could cook for everyone at home once a week? Tell him six positive things for every negative one.