Diesels have been held back in North America by the high concentrations of sulfur in fuel. Sulfur poisons catalytic converters. Its oxides are corrosive and increase the concentrations of particulates (sooty smoke) in the exhaust. Diesel cars have been unable to meet the emissions standards in five states, including CA and NY.

The advent of low sulfur diesel this fall would have changed this situation, except that EPA continues to stack the deck against diesels in passenger cars. The upper limit of sulfur in diesel will be going from 500 ppm to 15 ppm, which would have opened the door to European engines and emissions control technology for the 2007 model year. However, EPA has mandated that diesel cars must meet the same emissions standards as passenger cars, beginning with the 2007 model year. Sounds fair, but it's a big technological problem.

Diesel engines typically return 25-40% better fuel economy than gasoline engines. One of the main reasons is the higher energy content of the fuel, mentioned by HO. The combustion process can normally be optimised to minimise NOx (oxides of nitrogen) or minimise unburned hydrocarbons, but it's inherently difficult to minimise them both at the same time. So diesel engines have evolved with particulate traps and catalytic converters to convert CO and partially burned hydrocarbons to CO2 and water. To meet EPA's 2007 standards, some system for reducing NOx to nitrogen needs to be added to the exhaust train, and that's a problem.

One approach is to add a sequential catalytic converter. However, such a system requires ammonia (urea) to be injected to reduce the NOx. A supply of ammonia must be carried on-board the car and EPA is, of course, concerned that owners will neglect to fill it.  AFAIK, EPA has not signed off these systems, which raises a worry for me as to the availability of new diesel-powered light passenger vehicles next year. It will be interesting to see which manufacturers can produce an emissions-compliant system.