Microsoft has signed a deal with Indian startup Varaha to purchase more than 100,000 tons of carbon dioxide removal credits over the next three years, through 2029, expanding its portfolio of carbon removal projects as the tech giant scales up its artificial intelligence and cloud operations.
The project will convert cotton crop waste, which is often burned after harvest, into biochar – a charcoal-like material that can be added to soil, storing carbon for long periods while also helping to reduce air pollution caused by open-field burning. The project will initially focus on the western Indian state of Maharashtra and will include about 40,000 to 45,000 smallholder farmers.
The agreement comes as major companies, including Microsoft, increase spending on decarbonization — projects designed to physically remove carbon dioxide from the air. The Redmond-based software manufacturer is working toward its goal of becoming Carbon negative by 2030. However, Microsoft Total greenhouse gas emissions increased by 23.4% in fiscal 2024 from a 2020 baseline, driven primarily by value chain emissions associated with its growing cloud and AI businesses. Microsoft has not yet announced its carbon progress for 2025.
As AI operations expand rapidly, energy use and emissions are increasing, prompting companies to look beyond the United States for decarbonization projects that can take carbon dioxide out of the atmosphere. India has increasingly emerged as an attractive market for such projects due to large quantities of agricultural waste and the size of its agricultural economy.
Varaha will develop 18 industrial reactors that will operate for 15 years, with a total expected removal volume exceeding two million tons of carbon dioxide over the life of the project, the two companies said in a statement on Thursday.
One of the biggest gaps in decarbonization markets is not only installing the equipment needed to produce biochar, but reliably managing projects and dealing with a rigorous certification process. Varaha’s ability to offer credits at scale helped it emerge as the world’s second-largest player in permanent carbon delivery and caught Microsoft’s attention, Madhur Jain, co-founder and CEO of Varaha, said in an interview.
Microsoft’s requirements for digital monitoring, reporting and verification meant Varaha had to create custom systems in-house, Jain told TechCrunch, adding that working with tens of thousands of smallholder farmers in India makes tracking and logistics much more complex than biochar projects in the US or Europe that rely on concentrated biomass at a single industrial site.
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“More than 30% of our team has worked in agriculture,” Jain said, adding that experience has helped Varaha design systems that work on the ground with farmers.
The project’s first reactor is located next to Varaha’s 52-acre cotton research farm in Maharashtra, where the startup is working with farmers to test practices such as applying biochar to soil under real-world conditions. The startup plans to scale up to 18 reactors across India’s cotton growing belt under Microsoft’s commitment.
Varaha has rapidly expanded its biochar operations over the past year, Jain said. In 2025, it processed about 240,000 tons of biomass, produced about 55,000 to 56,000 tons of biochar and generated about 115,000 credits, up from about 15,000 to 18,000 tons the previous year, he added.
The startup expects volumes to rise further as new contracts begin, with Jain saying it aims to at least double its throughput in 2025 in 2026 to around half a million tonnes of biomass and nearly 250,000 tonnes of carbon sequestration.
Currently, Varaha has 20 projects across India, Nepal and Bangladesh – 14 in advanced stages and another six in early stages – spanning regenerative agriculture, biochar, agroforestry and improved rock weathering, working with about 150,000 farmers. These projects have the potential to sequester about one billion tons of carbon dioxide over a lifetime of 15 to 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 reliance on chemical fertilisers.
“This acquisition agreement expands the diversity of Microsoft’s decarbonization portfolio by designing the Varaha biochar project to be scalable and robust,” Phil Goodman, CDR program manager at Microsoft, said in a prepared statement.
While the Varaha deal highlights Microsoft’s push to diversify its decarbonisation portfolio, the volumes remain small compared to its overall footprint, as the software giant… I mentioned (PDF) Total greenhouse gas emissions of 15.5 million metric tons of carbon dioxide equivalent in fiscal year 2024.
Microsoft contracted Removing about 22 million metric tons of carbon In fiscal year 2024 as part of its carbon negative strategy. In recent months, Microsoft has signed a series of large decarbonization agreements. These include support AtmosClear project in Louisiana To remove 6.75 million metric tons of carbon dioxide over 15 years, and agree to purchase 3.6 million decarbonization credits from a biofuel plant in Louisiana owned by C2X.
Like Microsoft, Google has also signed decarbonisation deals as rapid advances in artificial intelligence drive up energy use and emissions. Google agreed to buy 100,000 tons of carbon removal credits from Varaha in January 2025, its largest biocoal deal.
Since its inception in 2022, Varaha has raised around $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.
