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A third runway at Heathrow airport has been given the go-ahead by the government after plans were found to meet environmental criteria.

The decision means the government will now become embroiled in a series of battles with those in its own party, opposition parties, environmentalists and local villagers.

Announcing the decision to the Commons, Geoff Hoon, transport secretary, said: "Doing nothing will damage our economy and have no impact whatsoever on climate change."

"Heathrow airport is operating at 99 per cent capacity and already losing ground to other hub airports, making it less attractive to mobile international business use," Mr Hoon told MPs.

Explaining his decision to expand the airport, Mr Hoon said Heathrow was "critical to long-term economic prosperity" in the UK.

In response, shadow transport secretary Theresa Villiers said Mr Hoon and Gordon Brown were "deaf to the concerns" of his own party and millions of others living under the flight path.

"A third runway at Heathrow would be an environmental disaster and will prove that you cannot trust a word Gordon Brown says on climate change and pollution," she said.

Norman Baker, Liberal Democrat transport spokesman, announced his party would promise in its election manifesto to reverse the decision. That means the expansion will almost certainly not take place in the event of a hung parliament at the next election.

"The opposition in this House and the country at large is such that this runway will certainly not be built," Mr Baker said.

Mr Hoon, visibly irritated by the Liberal Democrat's speech, replied: "I'm sorry the House had to suffer that tirade."

Mr Hoon, who is the son of a railwayman, also announced the establishment of a new company, High Speed 2, which will build a new high speed rail line connecting London to Scotland. That announcement drew gasps and outrage in the Commons, because of its similarity to the Conservative's policy which would install a new rail line instead of the Heathrow expansion.

There are further concessions.

Lord Adonis is expected to announce a £4.5 billion rail hub to improve links to the airport.

Mr Hoon said he was satisfied noise regulations and rules on air quality could still be met despite the expansion.

He also announced funding of £250 million to encourage uptake of electrical cars - a move he said should offset any emission increase from the expansion.

A new target was also established, whereby aviation emissions in 2050 must be below 2005 levels.

Mr Hoon claimed the runway will effectively constitute 'half a runway' due to the environmental restrictions placed on it. Only the greenest airlines, those with the most fuel-efficient aircraft, will benefit from extra slots.

Capacity will be increased to 6,000 passengers an hour, but the initial number of flights will be half of those originally proposed. A sixth terminal will also be built.

Concerns over the runway within the Labour party reach Cabinet level, with climate change secretary Ed Miliband, environment secretary Hilary Benn and leader of the House Harriet Harman all publicly expressing concerns.

Today's plan was evidently drawn up to push ahead with the runway while minimising environmental opposition. The government is clearly hoping the combined impact of rail investment and emissions rules at the runway itself will make the expansion less controversial.

Ms Villiers said: "If this is the result of the great row in the Cabinet, his colleagues didn’t get a very good deal out of it."

Green Party leader Dr Caroline Lucas said the announcement was "irresponsible, deceptive and environmentally disastrous".

Dr Lucas said: "This decision demonstrates a complete contempt for the environment, for the health of UK citizens and for our democratic processes."

Greenpeace has bought up a plot of land near the proposed site of the runway in a bid to stall building work. There are also reports Boris Johnson, London mayor, will launch a legal challenge.

Business groups and trade unions, however, support the plan.

Yesterday, the prime minister refused to allow for a vote on the issue in the Commons.

Responding to a inquiry about a vote during prime minister's questions, Mr Brown said: "The secretary of state is examining this matter, he will report to parliament, there will be a debate about what he says in the questions that follow, and then, if I may say so, if the matter was accepted and a proposal was put by the secretary of state, it would go to a planning inquiry."

Susan Kramer, who leads the Liberal Democrat effort to stop the expansion, said: "The refusal to have a proper debate and vote in the House is a sign of absolute cowardice."

The local village of Sipson will be bulldozed to build the runway.

Once the new runway is built, Heathrow will become one of the most polluting sources of CO2 in the country, emitting nearly 27 million tonnes of CO2 annually.

BAA chief executive Colin Matthews welcomed the decision, saying it opened the door for Heathrow to become a "world class hub airport".

Greenpeace executive director John Sauven said Mr Brown was "colour-blind" if he thought a third runway would be green.

"This package is designed to patch up a Cabinet split and will do very little to reduce the huge environmental impact of an expanded Heathrow, which will now become the single biggest emitter of carbon-dioxide in the country," he said.

"These new emissions caps aren’t even legally binding. The loopholes in this are so big you could fly a jumbo jet through them."