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.

You get other pollutants other than CO2 when you burn fuel in an internal combustion engine - things like NO2, NO as well as carbon particle, etc.

This is an example of how the pollution debate has became ridiculously carbon-centric...

Yes, CO2 is what causes global warming, but other pollutants can cause acid rain and lung cancer among many other effects.