Microsoft has recently announced a groundbreaking deal with Indian startup Varaha, in which they will purchase over 100,000 tons of carbon dioxide removal credits over the next three years. This partnership extends Microsoft’s commitment to carbon removal projects as the company continues to expand its AI and cloud operations.
The collaboration will focus on converting cotton crop waste, typically burned after harvest, into biochar. Biochar is a charcoal-like material that can be added to soil, storing carbon for extended periods while also reducing air pollution caused by open-field burning. Initially concentrating on the western Indian state of Maharashtra, the project will involve approximately 40,000–45,000 smallholder farmers.
This initiative comes at a time when major corporations, including Microsoft, are increasing their investments in carbon removal projects aimed at physically extracting carbon dioxide from the atmosphere. Microsoft, in particular, is working towards its goal of achieving carbon-negative status by 2030. Despite this, the company’s total greenhouse gas emissions saw a 23.4% increase in fiscal year 2024, primarily driven by value-chain emissions associated with its growing cloud and AI business.
With the expansion of AI operations leading to higher energy consumption and emissions, companies are looking beyond the U.S. for carbon removal projects that can effectively reduce atmospheric carbon dioxide levels. India has emerged as an attractive market due to its significant agricultural waste volumes and expansive farming economy.
Varaha plans to develop 18 industrial reactors that will operate for 15 years, with an estimated total removal volume exceeding 2 million tons of carbon dioxide over the project’s lifespan. The startup’s ability to deliver credits at scale has positioned it as the world’s second-largest player in durable carbon deliveries, attracting Microsoft’s attention.
Microsoft’s stringent requirements for digital monitoring, reporting, and verification necessitated Varaha to develop custom systems in-house. Working with tens of thousands of smallholder farmers in India presents unique challenges in terms of tracking and logistics compared to biochar projects in the U.S. or Europe.
Varaha has rapidly expanded its biochar operations, processing around 240,000 tons of biomass in 2025 and generating approximately 115,000 credits. With new contracts in place, the startup anticipates further volume increases, aiming to double its 2025 throughput in 2026.
Apart from carbon credits, the project aims to reduce open burning of cotton stalks, mitigate seasonal air pollution in India, and enhance soil health by returning biochar to farms, reducing reliance on chemical fertilizers.
While the Varaha deal highlights Microsoft’s efforts to diversify its carbon removal portfolio, the volumes remain modest compared to the company’s overall footprint. Microsoft reported total greenhouse gas emissions of 15.5 million metric tons of carbon dioxide equivalent in FY2024, contracting for about 22 million metric tons of carbon removals as part of its carbon-negative strategy.
In recent months, Microsoft has signed several large carbon removal agreements, including supporting AtmosClear’s Louisiana project and purchasing carbon removal credits from a biofuels plant in Louisiana owned by C2X. Similarly, Google has been entering into carbon removal deals to address the environmental impact of its AI advancements.
Since its establishment in 2022, Varaha has secured approximately $50 million in funding from various investors, including RTP Global, Omnivore, Orios Venture Partners, and Mirova. The startup continues to expand its regenerative farming program, with a focus on sustainable agricultural practices and carbon sequestration.
