Oh god I think I've opened up a can of worms
From the wiki, some parts omitted (...):
"EGR in spark-ignited engines
The exhaust gas, added to the fuel, oxygen, and combustion products, increases the specific heat capacity of the cylinder contents, which lowers the adiabatic flame temperature.
...Although EGR does measurably slow combustion, this can largely be compensated for by advancing spark timing...A properly operating EGR can theoretically increase the efficiency of gasoline engines via several mechanisms:
...
- Reduced heat rejection. Lowered peak combustion temperatures not only reduces NOx formation, it also reduces the loss of thermal energy to combustion chamber surfaces, leaving more available for conversion to mechanical work during the expansion stroke.
- Reduced chemical dissociation. The lower peak temperatures result in more of the released energy remaining as sensible energy near TDC, rather than being bound up (early in the expansion stroke) in the dissociation of combustion products. This effect is minor compared to the first two.
It also decreases the efficiency of gasoline engines via at least one more mechanism:
- Reduced specific heat ratio. A lean intake charge has a higher specific heat ratio than an EGR mixture. A reduction of specific heat ratio reduces the amount of energy that can be extracted by the piston.
... The EGR valve also cools the exhaust valves and makes them last far longer (a very important benefit under light cruise conditions)[citation needed]
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So what I'm getting from that is that it lowers peak combustion temps. The only thing I'm seeing that it says the exhaust directly cools in the exhaust valves.