Microsoft has signed a deal 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 AI and cloud operations.
The project will convert cotton crop waste, which is often burned after harvest, into biochar – a charcoal-like substance that can be mixed into soil, which stores carbon for long periods of time while also helping to reduce air pollution caused by open field burning. It will initially focus on the western Indian state of Maharashtra and involve approximately 40,000-45,000 smallholder farmers.
The agreement comes as big corporations including Microsoft are increasing spending on carbon removal – projects designed to physically remove carbon dioxide from the air. The Redmond-based software maker is working toward its goal of becoming carbon-negative by 2030. However, Microsoft’s total greenhouse gas emissions increase by 23.4% in fiscal year 2024 from a 2020 baseline, driven primarily by value-chain emissions associated with its growing cloud and AI business. Microsoft has not yet reported on its carbon progress for 2025.
With the rapid expansion of AI operations, energy use and emissions are increasing, forcing companies to look beyond the US for carbon removal projects that can pull carbon dioxide out of the atmosphere. India has emerged as an attractive market for such projects due to the large amount of agricultural waste and the scale of its agricultural economy.
Varaha will develop 18 industrial reactors that will operate for up to 15 years, with a total estimated removal volume of more than 2 million tonnes over the lifetime of the project, the companies said in a statement on Thursday.
One of the biggest gaps in carbon removal markets is not just setting up the equipment to produce biochar, but running the projects reliably and navigating a rigorous process for issuing credits. Co-founder and CEO Madhur Jain said in an interview that Varaha’s ability to deliver credits at scale helped it emerge as the world’s second-largest player in sustainable carbon delivery and attracted the attention of Microsoft.
Jain told TechCrunch that Microsoft’s requirements for digital monitoring, reporting and verification meant Varah had to build custom systems in-house, adding that working with thousands of small farmers in India makes tracking and logistics far more complex than biochar projects in the US or Europe that rely on biomass concentrated at a single industrial site.
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“More than 30% of our team has worked in the agriculture sector,” Jain said. The experience has helped Varaha design systems that work with farmers on the ground, he said.
The project’s first reactor will be located next to Varaha’s 52-acre cotton research farm in Maharashtra, where the startup works with farmers to test practices like applying biochar to the soil in real-world conditions. As part of Microsoft’s commitment, the startup plans to expand to 18 reactors in India’s cotton-growing region.
Varaha has rapidly expanded its biochar operations in the last year, Jain said. In 2025, he said, it processed about 240,000 tonnes of biomass, produced about 55,000-56,000 tonnes of biochar and generated about 115,000 credits, up from about 15,000-18,000 a year earlier.
The startup expects volumes to increase further as new contracts start rolling out, with Jain saying it aims to at least double its 2025 throughput to about half a million tonnes of biomass and about 250,000 tonnes of carbon sequestration in 2026.
Currently, Varaha has a total of 20 projects in India, Nepal and Bangladesh – 14 in advanced stages and another six in early stages – spanning regenerative agriculture, biochar, agroforestry and advanced rock weathering and works with approximately 150,000 farmers. Jain said these projects have the potential to sequester about 1 billion tonnes of carbon dioxide over a lifetime of 15 to 40 years.
Beyond carbon credits, the latest project aims to reduce 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 reliance on chemical fertilizers.
“This offtake agreement broadens the diversity of Microsoft’s carbon removal portfolio with Varaha’s biochar project design that is both scalable and sustainable,” Phil Goodman, Microsoft’s CDR program director, said in a prepared statement.
While the Varaha deal highlights Microsoft’s effort to diversify its carbon removal portfolio, the volume remains small compared to its overall footprint, as the software giant reported total greenhouse gas emissions of 15.5 million metric tons of carbon dioxide equivalent in fiscal 2024 (PDF).
Microsoft contracted to remove approximately 22 million metric tons of carbon in FY2024 as part of its carbon-negative strategy. In recent months, Microsoft has signed several large carbon removal agreements. These include supporting AtmosClear’s Louisiana project to remove 6.75 million metric tons of carbon dioxide over 15 years and agreeing to purchase 3.6 million carbon removal credits from a biofuels plant in Louisiana owned by C2X.
Like Microsoft, Google is also signing carbon removal deals as rapid AI progress increases energy use and emissions. Google agreed to buy 100,000 tons of carbon removal credits from Varaha in January 2025, in its largest biochar deal yet.
Since its inception in 2022, Varaha has raised approximately $50 million across various instruments. The startup counts RTP Global, Omnivore, Orios Venture Partners, IMC Pan Asia Alliance Group’s Octave Wellbeing Economy Fund and Japan’s Norinchukin Bank among its backers. In November, Mirova, a French climate-focused investment firm backed by Kering and other corporate investors, invested $30.5 million in Varaha to expand its regenerative agriculture program.
