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He said transport ministers had "used every excuse" to delay a public investigation.
The PBO said Transport for NSW had warned there was limited existing capacity to absorb demand.
Sue Holden, chief executive of the Woodland Trust, said: "Transport that destroys ancient woodland cannot be called 'green'.
Mike Childs, its head of science, policy and research, said: "Transport is the UK's biggest source of climate wrecking emissions.
He said: "Transport connections and infrastructure must be the foundation on which a prosperous northern economy is built.
The report said transport costs had risen for six months in a row and petrol prices hit their highest level since January.
Tessa Jowell, a former Olympics minister, said Transport for London would be made to draw up tougher guidelines than at present.
The agency said Transport Minister Otto Arndt presented a report drawn up by a special Government investigation commission that he headed.
The decision was "very finely balanced", said transport secretary Chris Grayling, meaning both options on the east coast mainline were terrible from this point of view.
The director of IPPR North, Ed Cox said: "Transport connections and infrastructure must be the foundation on which a prosperous northern economy is built.
Don Foster, the Liberal Democrat transport spokesman, said transport spending would fall by 7.5% in real terms in the five years from May 1997.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com