1. Offsets are unverifiable. It is technically impossible to tell whether "carbon offsets" are true offsets, or imaginary ones (i.e. "you might never have cut down those trees anyway"; "you should have been geosequestering that stuff regardless"). In a way, carbon offsets fall under the reification fallacy - which means that in a technical and philosophical sense, some supposed offsets simply do not exist.
2. Caps are chosen to be meaningless. Caps in carbon trading systems are generally too generous, and seem to have been dictated by industry lobby groups (rather than climatologists) in Australia. This is one of the reasons carbon trading has failed to produce any progress in Europe, where it has been tried already.
3. Markets are inherently undemocratic. Even if caps were appropriate, and offsets were meaningful, carbon trading uses a market mechanism to drive energy efficiency, meaning that those who can afford carbon credits have less incentive to stop polluting, and those who can't afford it are forced into efficiency whether it makes sense for them or not. To put it another way, perhaps we would prefer that a hospital keeps it's energy-inefficient equipment running even when they can't afford the carbon credits (which their electricity provider would charge for). In a market, efficiency is placed outside of democratic control.
4. Markets are inherently innefficient. Related to this point, carbon trading provides no mechanism for actual gains in renewable energy. Solar technology, for example, currently requires research in superconducters and battery storage in order to be viable on massive scales. For this to happen, someone needs to actually roll up their sleeves and DO IT! All that carbon trading can offer is a dubious incentive for a company to one day buy some solar electricity far in the future when the technology magically works itself out.
5. Markets (unless they're 'black markets') require a great deal of legislation and bureacracy to function. Again, even if caps were appropriate (they aren't), and offsets were meaningful (a virtual impossibility), resources are wasted on the bureaucracy needed to make carbon trading 'work'.
6. Markets encourage blind displacement of economic activity. Carbon trading encourages practices that displace more important economic activities in favour of more profitable (under the trading system) ones. (For example, land that might have produced crops for food, or been left as carbon sinks, are given over to sugarcane for "green electricity" production in a gas plant.)
7. Carbon trading sucks political time and media space away from better ideas. We have just wasted ages in the news cycle and in Parliament on a bunch of children (i.e. the Liberal Party) arguing amongst themselves while the other bunch of children (ALP) have been using whatever little political will they have to push a carbon trading scheme both here and at Copenhagen, where yet more time and political willpower is being wasted on an attempt at a more global emissions trading scheme. Carbon trading is a waste of our glorious pseudo-democracy itself.