By Laurence Frost and Gilles Guillaume

PARIS (Reuters) - Renault-Nissan's new gasoline-electric hybrid technology would be competitive in Europe, Chief Executive Carlos Ghosn said on Thursday, as carmakers turn away from diesel for smaller vehicles

The "e-Power" transmission, announced a day earlier by Renault's alliance partner Nissan for the Note subcompact car in Japan, amounts to an electric vehicle powered by a small gasoline generator instead of a large battery.

Carmakers are racing into electrification as Volkswagen's <VOWG_p.DE> emissions test-cheating scandal hastens diesel's decline and stiffens regulatory resolve. Renault and Toyota are among those signaling a faster retreat from diesel in small cars.

Although not emissions-free, e-Power's smaller battery makes it significantly cheaper than electric-only cars and never needs recharging. Fuel economy figures suggest that the carbon dioxide output compares well with traditional hybrid minis such as the Toyota Yaris.

"It's definitely cost-competitive with diesel," Ghosn said on Thursday, adding that the new technology "absolutely" would be viable for the European mass-market. Ghosn, who heads both carmakers, was speaking to Reuters at the New York Times Energy for Tomorrow conference in Paris.

A Nissan spokeswoman said: "There are no current plans for e-Power in Europe. But the technology can be adapted to other markets and (vehicle categories), so we wouldn't rule it out."

Renault-Nissan is not alone in using combustion engine generators to power electric cars.

They have featured aboard Chevrolet's 2011 Volt electric car and as a range-extending option for BMW's i3. PSA, the maker of Peugeot, Citroen and DS vehicles, is building electric prototypes with single-cylinder generators from Israeli start-up Aquarius Engines.

Nissan said that Japanese prices for its e-Power Note will start at 1.77 million yen ($17,140), a 27 percent premium over the basic gasoline version. That is comparable with the extra outlay for a diesel option in European cars such as the VW Polo.

The e-Power Note's stated fuel economy of 37.2 km per liter, based on Japanese regulatory test standards, suggests CO2 emissions of about 62 grammes/km. Toyota's Yaris hybrid emits 75 g/km in European testing.

Renault-Nissan aims to market a battery-only vehicle in China for as little as $7,000 to $8,000 after government incentives, Ghosn also said on Thursday.

(Editing by David Goodman)