I think it's due to the diesel generator being the the turbine category and all the turbines I've seen (including modded ones) don't produce (maybe can't) pollution.
Think the only way around this might be a system similar to the Pyanadon power houses. (Where the power house consumes "burnable" gases and is a powered entity so can produce pollution and outputs a gas that then goes to a turbine entity thus producing power).
This would of course require 2 entities to pull off rather then the singular diesel generator in this mod.
Don't think you could work it with a burner entity either since they can take any burnable fuel and diesel as a liquid doesn't count as a burnable fuel.
