The technology marks a big step forward for Honda at a time when rivals are racing to come up with ways to clear the world's strictest emissions regulations, called Tier II Bin 5, that the United States will usher in next year.
Diesel engines, which now power half of Europe's new cars, are slowly gaining traction with fuel-conscious consumers around the world since they typically get 30 percent better mileage than gasoline cars. Their weakness has been the higher exhaust levels of nitrogen oxide (NOx), a greenhouse gas.
Honda said on Monday its new diesel drive train features a unique method that generates and stores ammonia within a two-layer catalytic converter to turn nitrogen oxide into harmless nitrogen.
Honda engineers said the technology is superior to a process pioneered by Germany's DaimlerChrysler because the latter requires a complex system and heavy add-ons to generate ammonia from urea-based additives.
Some technical hurdles remain.
The system would need fine-tuning for the wide-ranging cetane indices of diesel fuel found in the United States. Honda also needs to develop technology to measure emissions levels according to U.S. On-Board Diagnostic System requirements.
But Japan's third-biggest automaker said it planned to roll out the advanced diesel engine in the United States within three years. DaimlerChrysler, which along with Volkswagen already sells diesel cars in the world's biggest auto market, is preparing its next-generation diesel car for a 2008 launch.
"Just as we paved the way for cleaner gasoline engines, we will take the leadership in the progress of diesel engines," Honda Chief Executive Takeo Fukui told a news conference at the automaker's R&D center north of Tokyo.
Fukui said Honda would be "open to considering" the licensing of its new diesel technology once it was perfected.
Honda has long been at the forefront of green power train technology, perhaps most famously with the development in 1973 of the CVCC (Compound Vortex Controlled Combustion) engine, which gave the popular Civic its name.
Earlier this year, it became the first in the world to announce voluntary global carbon dioxide reduction targets for its products and production processes.
In a demonstration of other new power plant technologies, Honda also showed off a prototype of its next-generation fuel cell vehicle that runs on a newly developed compact and more powerful fuel cell stack.
The new stack is designed to allow the hydrogen and water formed during electricity generation to flow vertically instead of horizontally, making the component 20 percent smaller and 30 percent lighter than the previous version.
Honda's new FCX fuel-cell car now has a driving range of 354 miles--a 30 percent improvement from the 2005 model--a maximum speed of 100 miles per hour and can be driven in temperatures as low as minus 22 degrees.
Honda plans to begin marketing the car in limited numbers in 2008 in Japan and the United States.
Honda said it also developed a flexible fuel vehicle (FFV) system that can operate on any ethanol-to-gasoline ratio between 20 percent and 100 percent. That car will be sold in Brazil, the biggest market for ethanol-based vehicles, later this year.
"Way out in the future, the ultimate green car will be fuel cell vehicles," Fukui said. "But in the meantime, you need a wide range of green technology to meet varying local needs and fuel supply."