In the US, total-loss 2-cycle engines are already well on their way to being legislated out of existence, and I understand the situation is similar in western Europe.

New small engines in California are required to have catalytic converters on them (as of January 2007 IIRC) and these can cut the emissions by about 85%.

The catalytic elements are built inside special mufflers. I have a bicycle with a 4-stroke gas engine on it and I tried (back around mid-2007) to buy a cat-muffler for the engine and the local dealer said they couldn't get them then, even though new Cali-legal engines were shipping with cat-mufflers on them. The only way to get one was to order a Cali-legal engine that came with one. Perhaps I shall go bother them again and see if the situation has changed....

Putting an engine on a bicycle greatly expands its usefulness as a means of transportation, by the by. The main problem with motorized bicycles in the US is that they're not considered motor vehicles in most states, so there's not consistent regulation of them--it's left up to the individual states, and state laws range from few restrictions, to various restrictions, to not allowing them at all. The lack of a national-scale market means there's not a lot of development in them going on.
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I expect we'll see hybrid motorcycles and scooters in widespread use long before we see electrics, for the same reasons as with the cars presently available. Electric vehicles have lousy range and are very expensive compared to gasoline engines, even with fuel costs at 3X what they are now. Battery technology is always improving, but batteries don't grow on trees and they ain't filled with milk and honey. When battery-powered vehicles do come into widespread use, there will be pollution problems associated with manufacturing and disposal of them as well.
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Hydrogen is a nice idea but the low energy densities coupled with the lack of a distribution infrastructure mean it's even farther off into the future than electric vehicles are.
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