compensating for carbon

A quote from the recent UN Bali Conference on Climate Change:

"I would like to see incentives right down to the personal level at home, with carbon trading on eBay or eTrade."
--Odin Knudsen, managing director of environmental products for JP Morgan

This idea of buying units of carbon from your neighbor confuses me. How does it work? I don't get it. How can you cancel out your impact on the planet so much that you have carbon to spare? Here's what my smart (getting his PhD in renewable energy) friend Adrian has to say:

Even though we breathe out CO2, everything is balanced over our lifetimes with respect to CO2, because the energy to keep us going comes from photosynthesis, which takes up CO2 from the atmosphere. We are also stores of reduced carbon compounds, just like trees and plants. When living things die and decompose, a lot of the reduced carbon (carbohydrates) is oxidized back to CO2.

So if we don't burn fossil fuels (or whole forests), we probably have a lifetime neutral/zero carbon footprint. The cave people had it about right. If you provide power to the grid, I think (not certain) that you still can't be less than zero unless you are using the power to somehow remove CO2. For example, a wind turbine used by a single family just to provide power for lights, etc. is not removing CO2 from the atmosphere--it's carbon neutral but not carbon negative. Also, the turbine itself requires energy to build, as do all of the items that it powers. So I'm going to say that it would be quite difficult, over a lifetime, to do better than a Neanderthal's carbon footprint. Unless you are a plant.

Most people are net consumers of CO2, with the qualified exception of people with solar, wind, [and other renewable resources] at their homes. Carbon taxes, carbon trading schemes, carbon credits, all assume that we need to produce some CO2 to live in a modern society. As such, each person, household, family, or whatever gets a set amount. If you exceed that, you pay a tax or have to buy credits from someone who is under their allotment. So a person can still earn carbon credits, even though they are net producers of CO2; they've simply come in under their quota. It is a short-term (few decades) solution, after which time the globe will hopefully be much, much closer to carbon neutral by using sun, wind, geothermal, tides, etc.

That makes sense. So, who determines what each person's set amount will be? That sounds like a political debate.