There was one proposal in Sir Rod Eddington's report to the Treasury with which, when I first read it, I wholeheartedly agreed. He insists that "the transport sector, including aviation, should meet its full environmental costs". Quite right too: every time someone dies as a result of floods in Bangladesh, an airline executive should be dragged out of his office and drowned.

Reading on, I realised that this is not exactly what he had in mind. Instead, he meant that airports can keep expanding and the capacity of roads can be increased, as long as people pay more money for their pollution. He has even been so kind as to put a price on other people's lives: £70 per tonne of carbon. This, we discover, is the "social cost" of global warming, derived by the British government's department for the environment, and unquestioningly accepted by Eddington, who was charged by Gordon Brown with keeping the country moving.

But what the heck does it mean? Does the government believe we can put a price on Bangladesh? On the people threatened by drought in the Horn of Africa? On coral reefs, rainforests and tundra? On the security of global food supplies? When the Stern review was published, some of us warned that people who know the price of everything and the value of nothing would interpret it as a licence to reduce the argument to a dispute about financial costs. This is what Eddington has now done. As long as the books are balanced, the problem is deemed to have been solved.

Even if we were to accept his outrageous terms of reference, and even if we were to agree with his proposition that an ever-expanding transport sector is compatible with "sustainability", there is an omission in Eddington's report. It is a dirty word beginning with c, which cannot be uttered in the presence of politicians. In 436 pages, the coach is mentioned only in the last volume, and then just to provide historical price comparisons with other modes of transport. As a current or future option, it does not, in Eddington's world, exist.

But few measures would go so far towards meeting his goal of "improving the capacity and performance of the existing transport network" than persuading people to switch from cars to coaches. The M25 has 790 miles of lanes. If these are used by cars carrying the average load of 1.6 occupants, at 60mph the road's total capacity is just - wait for it - 19,000 people. Coaches travelling at the same speed, each carrying 30 passengers, raise the M25's capacity to 260,000. Every coach swallows up a mile of car traffic. They also reduce carbon emissions per passenger mile by an average of 88%. So one of the key tasks for anyone who wants to unblock the roads while reducing the real social costs of carbon must be to make coach travel attractive.

But how? When I take the bus from Oxford to Cambridge, I arrive feeling almost suicidal. First I must cycle for 20 minutes in the wrong direction, into the city centre. Then I sit on a chair designed to extract confessions, and wait. When, at last, the coach departs, it fights through streets designed for ponies. After half an hour it leaves the city. It then charts a course through just about every depressing dormitory town in south-east England. On a good day, with a following wind, the journey from my house to my final destination in Cambridge, a total of 83 miles, takes four and a half hours. The average speed is 18 miles an hour, about 50% faster than I travel by bicycle. By car you could do it in 100 minutes.

The reason for this misery is simple: the system is unbelievably stupid. It is a hangover from the time when coaches were pulled by horses, and were probably faster. A far better scheme has been proposed by a visionary economist called Alan Storkey.

Storkey's key innovation is to move coach stations out of city centres, to the junctions of motorways. One of the reasons long coach journeys are so slow in the UK is that - in order to create a system that allows passengers to transfer from one coach to another - they must enter the towns along the way, travelling into the centre and out again. In the rush hour you might as well walk.

Instead of dragging motorway transport into the cities, Storkey's system drags city transport out to the motorways. Urban buses on their way out of town, he proposes, keep travelling to the nearest motorway junction, where they meet the coaches. By connecting urban public transport to the national network, Storkey's proposal could revitalise both systems, as it provides more frequent and more viable bus services for the suburbs.

The coaches would never leave the trunk roads and motorways. Some services would constantly circle the orbital roads; others would travel up and down the motorways that connect to them. You would change from one coach to another at the junctions. Just 200 coaches on the M25, Storkey calculates, would ensure an average waiting time of between two and three minutes. They would be given dedicated lanes and priority at traffic lights, disentangling them from the cars that now hold them up and force them to bunch. The tabloid newspapers might fulminate, but it would not be long before people stuck in their cars began to notice the buses roaring past on the inside.

With faster links to the motorways provided by dedicated urban bus lanes, and relief from the need to find a parking space, this could bring the overall journey time to below that of car travel. At rush hours and on bank holiday weekends the public system could be very much faster. It might even be made comfortable. Double-deckers could increase the leg room without losing much fuel efficiency, and why shouldn't every coach have TV screens and power points? In other words, the country's slowest, most uncomfortable and most depressing form of mass transport could be transformed into one of its fastest, smoothest and most convenient systems. An effective coach system could make a serious dent in car sales, and even reduce the demand for domestic flights.

Storkey's system costs next to nothing. It requires no new roads, no railway lines, no major public subsidies. If the land now occupied by coach stations is sold, it could be self-financing from inception. It's a much better use of private money, too: capital investment in coaches is roughly 10 times more efficient than the same investment in cars. You might have expected the financial case to have touched even Sir Rod Eddington's shrivelled heart.

Eddington's refusal to consider the form of transport that could make best use of our existing infrastructure is a disgraceful oversight. It suggests that his review might have less to do with meeting our transport needs than with meeting the needs of his chums in big business, for whom an efficient coach system represents a dangerous form of competition. But when the government hired the former chief executive of British Airways to reorganise the transport sector, what else did it expect?

· George Monbiot's book Heat: How to Stop the Planet Burning is published by Penguin

www.monbiot.com