The catalytic converter is part of an automobile's exhaust emission control system and have been around since 1975. In the United States, they have been mandatory on automobiles since 1978 and on trucks/vans since 1979.

A catalytic converter works by basically burning all the unused hydrocarbons in the vehicle's exhaust via a chemical reaction. If engines were 100% efficent, the only exhaust components would be carbon dioxide and water vapor. Internal combustion engines are quite dirty power sources. Not every hydrocarbon molecule is combusted completely, so emission control systems are a necessity.

how
Just like the name implies, the catalytic converter works as a catalyst, a three-way catalyst to be exact. Catalytic converters work because of platinum, rhodium and palladium in a ceramic honeycomb. The ceramic honeycomb exposes the maximum amount of exhaust gas to the minimum amount of the catalysts, as these metals are very expensive.

Exhaust gasses enter the converter and encounter the reduction catalyst, usually rhodium and platinum. The reduction catalyst changes NOx (oxides of nitrogen such as nitrous oxide (NO2) and nitrogen monoxide (NO)) into nitrogen gas (N2) and oxygen gas (O2). The nitrogen oxides are stripped of their oxygen molecules and trap the nitrogen atoms until it can combine with another nitrogen atom to form nitrogen gas molecules. At the same time, the Oxidation Catalyst is busy changing carbon monoxide (CO) and some of the oxygen (O2) liberated in the reduction catalyst into carbon dioxide (CO2). This stage of the converter relies on platinum and palladium to work.
Now then, you may be saying to yourself, "Self, this jethro character seems to know his automotive chemistry, but what if there isn't any extra oxygen in the exhaust to begin with?" Well, self, that's where another part of the emissions control system comes in - the oxygen sensor mounted between the exhaust manifold and the catalytic converter. It constantly monitors the amount of oxygen before the catalytic converter has has a chance to do its thing and changes the fuel/air mix accordingly, but that's material for another node.

where
Catalytic converters are usually mounted in the exhaust pipe near the engine and look like a wide place in the pipe, roughly 8" long and about 3 times as wide as the exhaust pipe itself. Just like most chemical reactions, catalytic converters work better when hot, so they are placed near the exhaust manifold so they will warm up quickly. When your car is cold, the catalytic converter does nothing to your exhaust - it has to warm up to an operating temperature of about 300 ° C to work effectively. This means on short trips (< 5 miles or so) the catalytic converter does nothing to clean your exhaust. The operating life of a catalytic converter can be shortened if it gets too hot, which necessitates it being a foot or so down the exhaust pipe.

what if it goes bad?
If your catalytic converter has gone bad for whatever reason, there are a few symptoms. If it is clogged or plugged, you will notice the vehicle responding very sluggishly and without much power. A rotten egg smell (same as hydrogen sulfide) is another symptom of a malfunctioning catalytic converter. Using leaded gasoline in a vehicle with a catalytic converter will cause it to fail very quickly. Catalytic converters are expensive to replace, as they rely on precious metals to work. Tampering with a catalytic converter, like cutting it off your truck before you install dual exhaust pipes with glass packs (which is wildly popular in the South), is quite illegal and carries a hefty fine.

In addition to the above, it is worth noting that switching the vehicle's engine off at anything above idle speed can be very bad for the catalytic converter. In this instance, unburned fuel will enter the catalytic converter and very likely ignite on the element (the heat shield that surrounds a "cat" is there for a reason), damaging the converter and making it perish faster.

Running the engine when it is misfiring, tow or bump starting the vehicle, or running it with an over-rich air/fuel mixture will have the same effect - allowing unburned fuel to enter the catalytic converter and possibly ignite.

Moreover, running the car if it is (visibly) burning oil, or using leaded fuel will coat the element in the catalytic converter and clog its passages, reducing its converting efficiency and possibly causing an overheat.

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