lovk, welcome to Matthew's Volvo Site.
Whilst checking the fluid level also check the condition of the fluid. fluid. If it is red it is (usually) OK. If it is brown and/or smells burned it needs changing. The change intervals for the fluid on this car are 20,000 miles (32,000kms).
If the fluid is OK then there is a possibility that the overdrive solenoid is not working as it should. Before going down that route post back with the result of the fluid checks.
If your check engine light is on it is not necessarily because of the gearbox playing up. The CEL indicates that a fault code has been set and that needs to be investigated as it may point to the cause of failing the emissions test.
The 1989 240 should be fitted with an On-Board Diagnostic (OBD) in the engine compartment, behind the left strut tower. With this you
can check for fault codes. A guide can be found at: http://www.matthewsvolvosite.com/forums/viewtopic.php?t=9708&postdays=0&postorder=asc&start=12
. If you find any codes you do not understand post back for help.
Work was good - retirement is better.
1996 850GLT 2.5 20v Estate Manual.
1995 Peugeot Boxer 2.5Tdi Autosleeper.
1984 244DL, Manual, Beige.
1987 744GLE, Manual, Green.
1991 960 3.0 24v, Auto, Silver.
1994 940T Wentworth, Auto, Blue.