From Wikipedia:

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Exhaust gas recirculation (EGR) is a NOx (nitrogen oxide and nitrogen dioxide) reduction technique used in most gasoline and diesel engines.

EGR works by recirculating a portion of an engine's exhaust gas back to the engine cylinders. Intermixing the incoming air with recirculated exhaust gas dilutes the mix with inert gas, lowering the peak combustion temperatures and (in diesel engines) reducing the amount of excess oxygen. Because NOx formation progresses much faster at high temperatures, EGR serves to limit the generation of NOx. NOx is primarily formed when a mix of nitrogen and oxygen is subjected to high temperatures.


And:

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EGR in Diesel Engines

In modern diesel engines, the EGR gas is cooled through a heat exchanger to allow the introduction of a greater mass of recirculated gas. Unlike SI engines, diesels are not limited by the need for a contiguous flamefront; furthermore, since diesels always operate with excess air, they benefit from EGR rates as high as 50% (at idle, where there is otherwise a very large amount of excess air).

Since diesel engines are unthrottled, EGR does not lower throttling losses in the way that it does for SI engines (see above). However, exhaust gas (largely carbon dioxide and water vapor) has a higher specific heat than air, and so it still serves to lower peak combustion temperatures; the diesel engine's efficiency is still improved by reduced heat rejection and dissociation.


1991 Mitsubishi Pajero XP TD LWB family hauler.