* New rules are a response to VW scandal
* Talks have dragged on for almost two years
* Germany had balked at EU supervision
By Alissa de Carbonnel
BRUSSELS, Dec 7 (Reuters) - EU negotiators agreed new rules on Thursday that give Brussels the power to check up on national car approval authorities and set targets for emission checks in the aftermath of the Volkswagen emissions scandal.
The EU Commission had proposed rules on the new powers, including the capacity to fine manufacturers directly, following the 2015 Dieselgate scandal when German carmaker Volkswagen admitted to cheating on U.S. diesel emissions tests.
But negotiations among EU countries and European Parliament to agree the rules have dragged on for almost two years since the EU executive proposed a draft law.
In final talks this week, EU diplomats said Germany and Italy dropped opposition to the Commission's bid for greater oversight to avoid a repeat of Dieselgate.
"The key elements of our proposal have been upheld, including real EU oversight and enforcement powers," Europe's Industry Commissioner Elzbieta Bienkowska said in a statement.
"We know that some car manufacturers were cheating and many others were exploiting loopholes."
Under the compromise deal, which still needs approval from the Parliament and member states to become law, the EU executive can trigger EU-wide recalls, carry out checks on cars and fine carmakers up to 30,000 euros per car for rule breaches.
Under current rules, national bodies, such as Germany's KBA authority, approve new cars and only they have the power to revoke those licenses.
The agreement was a win for EU officials, who have grown increasingly frustrated with what they see as governments colluding with the powerful car industry. European Commission research shows on-road emissions of toxic nitrogen oxides (NOx) as high as 15 times the regulatory limit.
All the big EU countries supported the compromise reached on Thursday, one EU diplomats said, "because they started to see the PR problem."
The draft law allows the EU to carry out an audit of national authorities which approve vehicle types and sets a minimum number of on-road emissions tests a country is obliged to carry out - after such checks in the United States helped to uncover the VW scandal.
But EU negotiators have dropped the Commission's plan to break cosy relations between carmakers and the laboratories they use to test cars by introducing a system whereby carmakers do not pay them directly for such tests.
Campaign groups said they hoped the changes would put an end to a lack of proper market surveillance by member states.
"More European oversight of national authorities should also help to eliminate conflicts of interest that might exist," the European Consumer Organisation (BEUC) head Monique Goyens said in a statement. (Reporting by Alissa de Carbonnel. Editing by Jane Merriman)
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