The report's co-rapporteur Gerben-Jan Gerbrandy said the outcome represents a damning verdict on the affair, saying, "The dieselgate scandal could and should have been prevented."
The report accuses the Commission of "only waking up slowly" to the scandal which rocked the car-making industry.
The Dutch ALDE group member was part of Parliament's dieselgate inquiry committee, which has carried out an exhaustive probe into the matter.
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On Monday, he launched the draft of the dieselgate inquiry report, together with co-rapporteur Jens Gieseke, a German EPP group member.
Commenting on the draft report, Gerbrandy said, "Dieselgate would not have happened if our national governments and the European Commission would have acted on their legal and administrative responsibilities.
"Our investigation points out that unnecessary delays in decision-making, negligence and maladministration have contributed to making this fraud possible."
The Volkswagen scandal was revealed following a study into differences between emissions from diesel vehicles in the US and Europe.
In September 2015, Volkswagen admitted to fitting cheat devices to more than 11 million vehicles. These were designed to deceive US authorities on the levels of harmful nitrogen oxide (NOx) emitted by a popular range of its diesel engines.
The firm agreed to recall affected vehicles and remove the cheat devices.
Parliamentary inquiries and criminal investigations were launched in several jurisdictions, including the European Parliament which set up a special committee of inquiry into the scandal.
The draft report authored by the two MEPs concluded that car manufacturers could hide suspicious diesel emissions "for years" due to "outdated" emissions tests carried out in laboratories.
The inquiry report states that the Commission's "failure to steer towards a quicker decision-making on new road emissions testing methods constitutes maladministration."
The report also points out that the Commission "should have acted" on information provided in 2012 by the Commission's joint research centre (JRC) on possible illegal practices in diesel cars, and requests from inside and outside the Commission to follow up with national authorities on problems in the car fleet.
Gerbrandy added, "Already in 2012 there were clear signs that there was something wrong with the emissions of diesel cars, but the Commission failed to undertake further investigations and legal steps. On the contrary, the Commission decided actively not to take action."
The rapporteurs recommend an internal Commission investigation on the developments in 2012. Former Commission officials stated in committee hearings that the JRC information was not moved up in the Commission's hierarchy.
The inquiry report recommends that in the future, one Commissioner should be responsible for both air quality and car emissions.
The responsibilities are currently divided between the Commissioner for environment and the Commissioner for industry and internal market. The report also recommends looking at potential fraud with other consumer products due to inadequate product testing.
The inquiry report concludes that member states contravened their legal obligations to monitor the potential use of defeat devices, despite a clear ban on defeat devices included in EU law.
"Governments disregarded their legal duty to monitor and enforce the ban on defeat devices. There seems to be a blind trust in the good intentions of car manufacturers, especially when it has production plants in the country. But is even more disturbing that even after the dieselgate scandal actually very little has changed," says the report.
"Some member states still refuse to issue proper penalties against illegal actions. The recall actions for faulty cars are mostly on a voluntary basis. Some member states refuse to disclose the full data of their national investigations on diesel emissions.
"Commissioner Elżbieta Bieńkowska (the Commissioner for internal market, industry, entrepreneurship and SMEs) is slowly waking up. It took more than six months to start infringement procedures against the countries that deliberately violated European law. Motorists and citizens living in polluted cities deserve much stronger and forthcoming actions to protect their consumer rights and health."
Bas Eickhout, one of the Greens/EFA group MEPs on the dieselgate inquiry committee, told this website, "We welcome the draft report of the inquiry committee setting out the maladministration at the level of the Commission and member states.
"In the conclusions, the internal fight between DG environment and DG industry should be put in greater focus: every attempt by DG environment to secure earlier investigation of cars with excessive emissions failed to be picked up."
Eickhout added, "In the recommendations, the need for an independent, European market surveillance authority should be strengthened. The need for surprise tests as part of in-service surveillance should also be emphasised.
"Both these issues will be subject to a fierce political battle with the member states in 2017 when we are dealing with the reform of the type approval framework and will be adopting the fourth package of RDE."