(Updates throughout, adds detail, comment)
* Fuel savings would outweigh cost of implementation
* 2020 target could be followed by 2025, 2030 goals
* Proposal would be adopted only after long EU process
BRUSSELS, June 6 (Reuters) - The European Commission is set to propose tighter carbon emissions standards for new EU cars, according to a draft proposal that is likely to divide the auto industry.
The proposal, expected to be made public next month, would make binding a 2020 goal to lower carbon dioxide (CO2) emissions to an average of 95 grams per kilometre (g/km).
So far it is only a provisional, non-binding goal and compares with an existing, binding target of 130 g/km.
Some industry representatives have said tougher binding standards would be extremely challenging.
Others have said they are achievable and would help to make the 27-country European Union's struggling car industry more competitive as international rivals catch up with environmental standards. [ID:nL6E8EMCLL]
"This regulation sets a target of 95 g CO2/km as average emission for the new car fleet," the draft seen by Reuters said.
Fines for non-compliance would be kept at existing levels of 95 euros for every gram over target per vehicle.
The draft also proposes setting long-term CO2 standards for new passenger cars for 2025 and 2030 by Dec. 31, 2014 at the latest, if such further targets are then deemed appropriate.
As part of its efforts to tackle greenhouse gas emissions, the EU in 2009 adopted rules that require carmakers to cut average car emissions to 130 grams of CO2 per km by 2015.
Carmakers are on course to meet that.
Road transport is one of the few sectors with rapidly rising emissions. Between 1990 and 2008, emissions from the sector increased by 26 percent, according to figures from the Commission, the bloc's executive arm.
An impact assessment on the proposed new law, also seen by Reuters, says a roughly 25 percent reduction in car and van fuel consumption would save an estimated 25 billion euros ($31.2 billion) per year.
It also says estimated fuel savings from implementing the 2020 target would more than compensate for the expected cost of compliance.
For the average motorist, fuel savings of around 500 euros per year would stem from the 95 gram target in 2020, based on a driving distance of 20,000 km per year and a fuel cost of 1.4 euros per litre.
The Commission proposal, once made public, will have to go through a long EU legislative process before it can take effect.
The Commission refuses to comment on proposals before they are officially made public.
CAMPAIGNERS WANT EVEN MORE
Consumer groups and environmental campaigners are keen for tighter standards and some want the Commission to be more daring.
"Tighter CO2 standards mean spending less at the pump," Greg Archer, programme manager at the T&E transport campaign group, said.
"But drivers have been short-changed. The EU can and must go further by tightening the 2020 target to 80g CO2/km and introducing a target for 2025."
Some in the car industry have called for more flexibility on environmental standards to help ease costs for a sector struggling with overcapacity, an economic downturn and tough competition from beyond Europe.
CARS 21, a policy group that gathers ministers from EU member states, auto executives, EU commissioners and trade union representatives, met on Wednesday and adopted a report on its vision to revive the industry. [ID:nL5E8H59C7]
Sergio Marchionne, president of the car industry association ACEA and CEO of Fiat FIA.MI, said it was essential to implement the findings of the report and particularly to ensure a level playing field in terms of international trade.
The industry says that following an EU free trade agreement with South Korea that began to take effect in July 2011, 150,000 more South Korean cars were on European roads.
Marchionne said trade negotiations with Japan had been discussed at Wednesday's CARS 21 meeting.
"It's an issue that is first and foremost on our minds," he said. "We need to be very careful before we open ourselves up to any other exposure when the economic underpinning is as weak as it is."
For Factbox on CARS 21 proposals: [ID:L5E8H6AIC] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
($1 = 0.8001 euros)
(Editing by Anthony Barker and Dale Hudson)
((Barbara.hm.Lewis@thomsonreuters.com)(+32 2 287 68 43)) Keywords: EU CARS LAW/
(C) Reuters 2012. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing, or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.