Microsoft has signed an agreement with Indian startup Varaha to buy more than 100,000 tons of carbon dioxide removal credits over the next three years, until 2029, expanding its portfolio of carbon removal projects as the tech giant ramps up its AI and cloud operations.
The project will convert cotton crop waste, which is often burned after harvesting, into biochar – a charcoal-like material that can be added to the soil, storing carbon for a long time and also helping to reduce air pollution from open field burning. It will initially focus on the western Indian state of Maharashtra and involve around 40,000-45,000 smallholder farmers.
The agreement comes as large companies, including Microsoft, increase the cost of decarbonisation – projects designed to remove carbon dioxide from the air. The Redmond-based software manufacturer strives to become carbon-negative by 2030. However, Microsoft total greenhouse gas emissions increased by 23.4% in fiscal year 2024 from a 2020 baseline, mainly driven by value chain emissions related to the growing cloud and AI business. Microsoft has yet to report on carbon progress for 2025.
With the rapid expansion of AI operations, energy use and emissions are on the rise, forcing companies to look beyond the US for carbon removal projects that can take carbon dioxide out of the atmosphere. India is increasingly becoming an attractive market for these projects due to the large amount of agricultural waste and the economies of scale of agriculture.
Varaha will develop 18 industrial reactors that will operate over 15 years, with a total removal volume projected to exceed 2 million tons of carbon dioxide over the life of the project, the company said in a statement on Thursday.
One of the biggest gaps in the carbon removal market is not just installing equipment to produce biochar, but running the project reliably and navigating the rigorous process of issuing credits. Varaha’s ability to deliver credits at scale helped it become the world’s second-largest player in sustainable carbon delivery and caught the attention of Microsoft, co-founder and CEO Madhur Jain said in an interview.
Microsoft’s need for digital monitoring, reporting, and verification meant Varaha had to build a bespoke system in-house, Jain told TechCrunch, adding that working with tens of thousands of small farmers in India made tracking and logistics more complex than biochar projects in the US or Europe that depend on biomass concentrated at a single industrial site.
Techcrunch event
San Francisco
|
13-15 October 2026
“More than 30% of our team has worked in agriculture,” Jain said, adding that his experience has helped Varaha design a system that works on the ground with farmers.
The project’s first reactor will be located next to the 52-hectare Varaha cotton research farm in Maharashtra, where the startup is working with farmers to test practices such as applying biochar to the soil under real-world conditions. The startup plans to scale up to 18 reactors in India’s cotton-growing belt in Microsoft’s commitment.
Varaha has rapidly expanded its biochar operations over the past year, Jain said. By 2025, process about 240,000 tons of biomass, produce about 55,000-56,000 tons of biochar and produce about 115,000 credits, from about 15,000-18,000 a year earlier, he added.
The startup expects volumes to increase further when new contracts begin, Jain said, aiming to at least double its 2025 throughput by 2026 to around half a million tonnes of biomass and close to 250,000 tonnes of sequestered carbon.
Currently, Varaha has a total of 20 projects in India, Nepal, and Bangladesh – 14 in advanced stages and another six in early stages – that include regenerative agriculture, biochar, agroforestry, and enhanced rock weathering and work with around 150,000 farmers. These projects have the potential to capture about 1 billion tonnes of carbon dioxide over a lifetime of between 15 and 40 years, Jain said.
Beyond carbon credits, the latest project aims to reduce the open burning of cotton stalks, which contributes to seasonal air pollution in parts of India, while returning biochar to farms to improve soil health and reduce dependence on chemical fertilizers.
“This offtake agreement expands the diversity of Microsoft’s carbon removal portfolio with the scalable and sustainable design of the Varaha biochar project,” said Phil Goodman, director of Microsoft’s CDR program, in a prepared statement.
While the Varaha deal highlights Microsoft’s push to diversify its carbon removal portfolio, the volume remains small compared to its overall footprint, as the software giant. reported (PDF) total greenhouse gas emissions of 15.5 million metric tons of carbon dioxide equivalent in FY2024.
Microsoft is contracted to approximately 22 million metric tons of carbon removal in FY2024 as part of the carbon-negative strategy. In recent months, Microsoft has signed a string of large carbon reduction agreements. This includes backing The Louisiana AtmosClear Project to remove 6.75 million metric tons of carbon dioxide over 15 years, and agreed to purchase 3.6 million carbon credits from a biofuel plant in Louisiana owned by C2X.
Like Microsoft, Google has also signed a carbon elimination agreement as AI advances rapidly drive down energy use and emissions. Google agreed to buy it 100,000 tons of carbon credits from Varaha in January 2025, is the largest biochar deal.
Since its inception in 2022, Varaha has generated around $50 million in various instruments. Beginning the number RTP Global, Omnivore, Orios Venture Partners, IMC Pan Asia Alliance Group’s Octave Wellbeing Economy Fund, and Japan’s Norinchukin Bank are among the backers. In November, Mirova – a French climate-focused investment firm backed by Kering and other corporate investors – invested $ 30.5 million in Varaha to develop a regenerative farming program.