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Those exemptions are allowed and based on the idea that the car is near the end of its life and will be off the road within the next year or so. Many states do not allow future exemptions and some limit the number of times a car may fail emission tests.
With the cost of fuel these days, having the engine pass indicates that economy will probably be the highest it could be based on the engine's mechanical conditions. Worn spark plugs and lazy O2 sensors account for a huge percentage of failures (one for HC, the other for NOx). Each will cost gas mileage.
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