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Your catalytic converter looks just like the muffler. It's located before the muffler. And yes, you have to have it. It's illegal to remove it. The cliff notes version is that they convert harmful gases produced by your engine (carbon monoxide) into CO2 and hydrocarbons to water and CO2 (carbon dioxide). It's a lot more complicated than that, but I'm sure this is enough to make you realize how important Catalytic converters are for the environment.
Were you having any other issues than the light coming on? And 250 for parts and labor for the the tensioner pulley is pretty steep. Can you do the work yourself? I replaced mine recently ('94 Buick LeSabre) and it took me 15 minutes.
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