This is a reduced relative clause. Because the full relative clause would have the verb 'be' ['is' in this case] you can remove the relative pronoun [that/which] and 'be'. They are producing a scent like that which/that is emitted by an ant larva. This is often done with such passive voice structures as they always have the verb 'be' and a relative pronoun. If you made the sentence active voice, you can see what happens to the verb 'emit'. They are producing a scent like that [which/that] an ant larva emits. This reduction is also common with continuous structures, as they also use the verb 'be'. The man who is staying in the room next to mine snores very loudly. The man staying in the room next to mine snores very loudly. If you want more information about these structures, you can look up relative and participle clauses.

The structure of the sentence is: "They produce a scent like NOUN". For example, you could say "They produce a scent like roses" or "They produce a scent like peppermint". Your sentence, which is correct, creates a noun clause to play the role of the noun. "That" is an excellent word for creating noun clauses. Here are some examples: "THAT YOU WON THE RACE pleases me." "I think THAT TOKYO HAS 13 MILLION PEOPLE" In your sentence, the noun clause is "that emitted by an ant larva". I have one suggestion that is unrelated to your question. Try to use good verbs. The only verb in your sentence is "are", which contributes almost nothing. Your good verbs are hiding behind your participles, "producing" and "emitted". Those are adjectives, not verbs. To improve your sentence, transform one or both into real verbs: They PRODUCE a scent like that emitted by an ant larva. They PRODUCE a scent similar to that of an ant larva. They EMIT a scent similar to an ant larva's. Those sentences are superior to yours because the most important word of the sentence, the verb, boldly expresses the purpose of the sentence.

‘Like that’ here means ‘similar to’ The scent they are producing is similar to that/one emitted by an ant larva It wouldn’t be wrong to add the verb to be Similar to one that is emitted by an ant lava. However, it’s not necessary to do so. Sounds a weird scent btw. I don’t think I’d wear it ;)