He is probably referring to other pollutants such as NOx. It is unavoidable to produce some amount of these pollutants in an oil combustion process. But California has shown that it's possible to get this down to a low level. Smog used to be really bad in LA. But a combination of catalytic converters, strict emissions testing, and oil refinery requirements to make cleaner burning gas has dramatically reduced smog. The oil refinery requirements make CA gas very expensive compared to the rest of the nation. But I think it's worth it for the air pollution improvements.
Oxides of nitrogen, soot and various other pollutants come out of burning diesel, even if it's just carbon we pulled out of the air. It would be carbon neutral, but not pollution neutral.
Doesn't burning it just turn it back into what it was made from? You're not releasing any more carbon than you put into it.