Palm oil methyl ester (POME) produced from crude palm oil have some excellent properties which makes it a feasible alternative to diesel fuel. However, its higher oxygen content makes it nitrogen oxide emission prone when burned in diesel engines. This problem can be resolved by emulsifying POME with distilled water in the presence of suitable surfactant. Two phase water in oil emulsion is prepared by using ultrasonic bath sonication. SPAN 80, a lipophilic surfactant is used for 1% by volume to prepare the emulsion. Water quantity in the emulsion is varied by 5% and 10% by volume and stability study is performed. It is found that emulsion with 5% water is more stable. Thereafter, POME emulsion samples are prepared with 5% water and tested in a variable compression ratio diesel engine. The performance and emission characteristics are investigated for a set of loads and compression ratios (CR). The experimental observations show that 5% water in POME produce 3.5% lower brake thermal efficiency and 11% higher brake specific fuel consumption as compared to baseline diesel. Furthermore, the exhaust gas temperature and other emissions like oxides of carbon, oxides of nitrogen and hydrocarbon for the emulsified POME are found to be lower than the baseline diesel.

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