Operation of any fuel-fired power generating equipment results in emissions of exhaust gases. Principal among these are carbon dioxide (CO2), water vapor (H2O), oxides of nitrogen (NO and NO2, generally referred to as NOx), oxides of sulfur (SOx), carbon monoxide (CO), unburned hydrocarbons (UHC), and particulates. The environmental permitting requirements for on-site generation impose restrictions on emissions of NOx, SOx, CO, and particulates because of their contributions to smog and acid rain. Regions of the U.S. with significant air quality problems are classified as "Non-Attainment Zones" and severe limits are placed on annual emissions of these pollutants in those areas. As a consequence, requirements for pollution abatement equipment are more stringent in those areas.

The rates of emissions depend on the quantities of fuel consumed, the type of fuel used, and the temperature of combustion. "Thermal" NOx emissions are a consequence of the high combustion temperatures; the higher the temperature level, the greater the formation rate for NOx. This is true no matter what fuel is used. "Fuel based" NOx emissions are negligible in systems using natural gas, but they can be a significant source of pollution when fuel oil is used. SOx formation is a consequence of sulfur contained in the fuel and is insignificant for natural gas but must be considered when fuel oil or other fuels are used. Generally, technologies for reducing NOx and SOx emissions increase emissions of CO and UHCs.

The least expensive mechanisms for reducing NOx emissions are based on lowering the combustion temperature to lower thermal NOx. This can be accomplished by injecting water or steam with the combustion air or by specialized designs of the combustion chambers. Exhaust gas treatment can be performed with non-selective or selective catalytic reduction (NSCR or SCR). NSCR causes CO to react with NOx in the presence of a catalyst to form CO2 and N2. In the case of SCR, an ammonia or urea solution is sprayed into the exhaust gases from the power generator where NH3 reacts with NOx in the presence of a catalyst to form nitrogen (N2) and water vapor (H2O). NSCR is commonly used in conjunction with rich-burn IC-engines while SCR is applied more often to gas turbines. Efficient operation of SCR requires careful control of the ammonia spray and the exhaust gas temperature. SCR can add $500 to $900 per kW to the cost of small gas turbines (<5 MW) and on the order of $250 per kW or less to larger turbines. Low NOx burners cost about the same as water or steam injection. Scrubbers can be used to reduce SOx emissions. This is accomplished by injecting calcium carbonate (CaCO3) in the form of a lime or limestone solution with SO2 in the exhaust gases to produce CaSO3 and CO2. Carbon monoxide can be forced to react with oxygen in the exhaust using a catalyst to form CO2. Wet and dry equipment are available to reduce particulates in the exhaust.

SCR and other catalytic processes can be added to reciprocating engine generators to reduce their emissions, as is commonly done with gas turbines. In both cases the reduced emissions come at the cost of increased maintenance and operating costs and may affect operating efficiencies.

Emission rates for equipment can be reported in ppmv (parts per million, volume), pounds per million Btu of fuel (lb/MMBtu), or milligrams per mega-Joule of fuel (mg/MJ) and they are generally regulated in terms of tons per year. The conversion between units is not entirely straightforward, however, particularly when changing from ppm to lb/MMBtu or mg/MJ. This change is complicated because ppm incorporates the air flow rate which is not the same for all equipment. The amount of air required to oxidize a specific fuel is fixed (stoichiometric requirement), but different engine types use different amounts of "excess" air. Lean burn internal combustion engines may operate with around 100% excess air (200% of the stoichiometric rate) while gas turbines use 300 to 400% excess air; microturbines may use more the 800% excess air.