LONDON, May 22 (Reuters) - Microsoft Corp ( MSFT ) has

struck a deal to buy 1.6 million carbon removal credits from

what the developers say is one of the largest fully financed

nature-based removals projects in Central America.

The 10,000 hectare project in Panama is part-financed by

Microsoft ( MSFT ), which is one of the largest corporate buyers of

credits, and aims to remove 3.2 million tonnes of carbon from

the atmosphere by planting over 6 million trees in areas

degraded by cattle ranching.

Tech giants globally are spending billions of dollars on

projects which lock away or avoid carbon emissions as part of

their efforts to meet sustainability goals.

But voluntary carbon markets, which enable companies to buy

credits to offset their emissions, are under-fire over concerns

that many of the projects do not deliver the environmental or

sequestration benefits they claim.

What sets this project apart, developer Ponterra said, is

the fact it focuses on restoring land degraded by cattle

ranching by planting 6 million trees - known as reforestation -

rather than protecting existing forests from deforestation.

This means the project can sell carbon credits based on

extra tons of carbon removed from the atmosphere, rather than on

avoided emissions.

The project will also promote biodiversity restoration and

provide over $70m to local communities through lease payments, a

share of carbon credit sales paid to landowners, salaries and

donations to local NGOs.

It comes as scientists and interested parties debate whether

allowing companies to buy offsets is good for the planet.

In the U.S. cloud based computing and AI are driving

emissions higher. Microsoft's ( MSFT ) own carbon emissions have risen

30% since 2020 largely due to its construction of data centres,

the tech giant said in its 2024 sustainability report.

It has committed to achieving zero carbon emissions and

waste by 2030 but will need to purchase carbon credits in order

to do so, buying 5.015 million metric tonnes of carbon removals

in 2023 to support this.

The project is being developed by Ponterra, with Rubicon

Carbon and Carbon Streaming who alongside Microsoft ( MSFT ) provided the

financing. The backers did not disclose the size of the deal, or

the price per ton paid by Microsoft ( MSFT ).