The PCM monitors exhaust emissions by using a heated oxygen sensor (HO2S) that is in the exhaust stream after the 3-way catalytic converter (TWC). This HO2S #2 produces an output signal that the PCM uses to calculate the oxygen storage capacity of the catalyst. The PCM monitors the efficiency of the catalyst by allowing the catalyst to heat up, and then wait for a stabilization period while the engine is idling. The PCM then adds and removes fuel while monitoring the HO2S #2. When the catalyst is functioning properly, the HO2S #2 responses to the extra fuel is slow compared to the response of the HO2S 1, which is located before the TWC. When the HO2S 2 response is near that of the HO2S 1, the oxygen storage capability and efficiency of the catalyst may be degraded below an acceptable threshold.