Modern diesel engines used on diesel-electric locomotives and oceangoing ships have very sophisticated systems to remove the diesel particulates and reduce the NOx output using various forms of selective catalytic reduction (SCR). You see them on BMW and Mercedes-Benz turbodiesel automobiles, and they are very expensive to implement (it costs about US$2,500 to US$5,000 per car). At those prices, it'll be actually be cheaper to build a true gas-electric hybrid, as Toyota has shown with the standard Prius (circa US$22,000 to US$32,000 depending on options).
I do know that VW and Mercedes-Benz have sold gas-electric hybrids in the US market. It's likely that both companies may push for more gas-electric hybrids sold in the US market until HCCI engine technology is ready a few years from now.
I was really hoping that Hydrogen internal combustion engines took off. Ford, Mazda and BMW were working on them for a while, but they all seem to have gone off in a different direction, now.
I have yet to see an SCR equipped locomotive come through. They do exist, but they are few and far inbetween.
The answer for the railroads is to offset high NOx producers with “credits” from low NOx producers.
Anyway, our main concern is with particulate emissions, which is a sign of poor efficiency, not to mention setting wayside fires by blowing sparks of burning carbon out of the stack.
Thermal efficiency of a diesel engine is diametrically opposed to NOx emissions. Diesels need high compression and combustion temps to wring as much power out a pound of fuel as possible.