It's just as much a problem today (I can say working in the industry!) but rather a case of four steps forwards, three backwards, rather than the enormous changes encountered when emissions constraints were first introduced.
I used the word performance as a bit of a catch all, not just referring to power outputs, but economy, reliability, refinement etc.
Of course manufacturers don't shout about the backwards steps every time the emissions goal posts change; the brochures for a face lifted model will proudly announce compliance with Euro III or Euro IV emissions levels, but not point out that the engine has been derated by 20kW (the
0-60 time maintained by reducing the trim weight and fiddling with the gear ratios...) the engine is louder across the speed range (but you've paid an extra £200 for an improved sound insulation pack to compensate), the real world fuel consumption has deteriorated, while the tuning has been tweaked to keep the published figures looking acceptable, and that we've bolted on a whole load of unserviceable electronic gubbins at the last minute that will go horribly expensively wrong somewhere down the line...What is noticed though is when the new models are launched, with their marvellous new engine ranges which have all the newer technologies designed in from the start, but here you don't really see a like for like comparison because so much is new or changed. The customer will never know the true potential of a new engine design, because so much has already had to be traded off in the development process, and margins kept in hand for the next step change in emissions limits or other legislated requirements.