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Thermal efficiency basically refers to just the efficiency of an ICE (or any heat engine for that matter) – i.e. how much of the chemical energy of the fuel you manage to convert into mechanical energy in the drive train. The better the efficiency, the less fuel you need to produce the same power output, obviously producing less CO2 in the process.

(To be more specific, the terms are often used interchangeably. Thermal efficiency has an exact definition in an ideal heat engine and even ways of calculating the theoretical maximum for given conditions – but CO2 or chemical reactions have nothing to do with an ideal heat engine to start with. I'd personally perhaps prefer to talk about just the efficiency in an actual ICE – even if just to be clear none of the losses are conveniently left outside the calculation.)