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Yes, you can give up one of your colonies (cited from Ikariam Wiki):

You can abandon a colony from the town hall. If you wish to abandon your capital, you must first move your capital to one of your colonies using the "Declare This Town To Be Your Capital" button in the Governor's Residence.

There are several reasons you may wish to abandon a colony. One is that the local island is very low level, and it is faster to move to an more developed island than to try and upgrade your existing island. Another reason might be that you are dissatisfied with the luxury resource and/or world wonder on your island, and you want to make a fresh start that better fits your gameplay style.

When you abandon a colony, you lose all resources, citizens, and buildings in that colony. For this reason, it is a good idea to first demolish all your buildings to salvage some of their materials, then ship those materials to a different location. You cannot abandon a colony until all "events" associated with that colony are cleared, which includes the shipping of your goods. So if you try and salvage materials, you will need to wait longer. Be careful when demolishing buildings that you save your warehouse until last, so that you don't accidentally lose goods by destroying the warehouse. Similarly, you should be careful demolishing your trading port, as loading goods will become slower and slower.

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