A couple of things:
1) Japanese companies are working on a modern version of exhaust gas recirculation (EGR) that will reduce diesel exhaust emissions with less need to use an expensive selective catalyst reduction (SCR) system such as urea gas injection or Honda's electrically reactive catalyst to reduce NOx gases to simple NO2, which is easy to remove with conventional catalytic converters. This may pave the way for easier compliance with standards as stringent as EPA Tier 2 Bin 4, the proposed 2010 standard for on-road diesel engines
Notice I said "current" technology By that I mean technology that is actually on the market, not the stuff in development.
2) The new EPA standard actually is essentially forcing all commercial diesel engines to meet at least the EPA Tier 2 standard for industrial diesel engines (heavy trucks, diesel-electric locomotives, power generators and marine engines). Fortunately, there has been a lot of work on exhaust emission control retrofits, and Union Pacific Railroad recently demonstrated an exhaust emission control system that can be retrofitted to older locomotives at around US$22,000 per locomotive, cheap compared having to buy an all-new Tier 2-compliant locmotive at around US$1 million per locomotive.
On-road diesels have to meet these standards by 2010, off-road diesels have until 2012. CAT figures it would be cheaper and easier to drop the on-road market and have an extra two years to meets the standards for their products.