in dry areas or low relative humidity, the steam from the exhaust is less obvious but the byproduct of oxidation( combustion) of hydrocarbon + oxygen will always result in the formation of H2O. you can't avoid this phenomenon. in the case of dirty diesels, the soot usually combines with this condensed water droplets. the fuels which contain traces of sulfur too, creates some acidic compounds as H2SO4 or sulfuric acid that accelerates corrosion on the exhaust system.
a perfectly working catalytic converter(reduction catalyst and oxidation catalyst) converts the pollutants into inert elements. the reduction catalyst breaks down the NOx(when the combustion temperatures reaches or exceeds around 2500 degrees fahrenheit) into O2 and N2. then the freed up oxygen is fed to the oxidation catalyst to further oxidize the CO and HC(unburned or incompletely burned fuel)





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