The exhaust system can be a dry stack routed up the mast, or a wet system exiting the stern or side under water or just above the waterline. ^[1][2][3][4]

Intuitively, you may not like large underwater openings protected by an inverted plumber’sSecond trap. Also, the pumping losses on the engine will be greater with a wet exhaust. But anecdotally more boats have had stack fires than have been swamped by wet exhausts. Wet exhausts are cooler, and use flexible hosing.

In the wet system, seawater circulates in a jacket around the exhaust to cool it. Cast iron jackets tend to rust out after a few years. Wet exhausts are also quieter, use a smaller muffler, and don’t broadcast soot or PM10 pollutants on the boat deck. They only soot up the hull when the boat rocks or yaws to expose the outlet.

References

1. ↑ http://www.nordhavn.com/resources/tech/exhaust.php
2. ↑ http://www.westmarine.com/WestAdvisor/Exhaust-System-Basics
3. ↑ http://www.akmicorp.com/marine-diesel-exhaust-wet-or-dry/
4. ↑ http://www.yachtingmagazine.com/critical-care