Microsoft has signed an agreement with Indian climate startup Varaha to purchase more than 100,000 tonnes of carbon dioxide removal (CDR) credits over the next three years, through 2029, as the technology company expands its carbon removal portfolio amid growing energy demand from its AI and cloud businesses.
Under the agreement, Varaha will convert cotton crop residue — which is often burned after harvest — into biochar, a carbon-rich material that can be applied to soil to store carbon over long periods. The project will initially focus on the western Indian state of Maharashtra and is expected to involve around 40,000 to 45,000 smallholder farmers.
The deal comes as large corporations increase investment in carbon removal projects designed to physically remove carbon dioxide from the atmosphere. Microsoft is working towards its target of becoming carbon negative by 2030, although its total greenhouse gas emissions rose 23.4% in fiscal year 2024 compared with a 2020 baseline, largely due to value-chain emissions linked to the expansion of cloud and AI operations.
Varaha said it plans to deploy 18 industrial biochar reactors under the agreement, operating over 15 years, with a projected lifetime carbon removal volume of more than 2 million tonnes of carbon dioxide.
“One of the biggest gaps in carbon removal markets is not just installing equipment, but running projects reliably and issuing credits under stringent standards,” said Madhur Jain, Varaha’s co-founder and chief executive officer. He said the company’s ability to deliver credits at scale and meet Microsoft’s digital monitoring, reporting and verification requirements had been a key factor in the partnership.
“More than 30% of our team has worked in agriculture,” Jain said, adding that this experience had helped the company design systems that function across fragmented farming landscapes.
The first reactor will be located next to Varaha’s cotton research farm in Maharashtra, with plans to scale the model across India’s cotton-growing regions. The company said the project would also help reduce open-field burning of crop residue, a contributor to seasonal air pollution, while improving soil health through biochar application.
“This offtake agreement broadens the diversity of Microsoft’s carbon removal portfolio with Varaha’s biochar project design that is both scalable and durable,” said Phil Goodman, Microsoft’s carbon dioxide removal programme director.
Despite the new agreement, the volumes involved remain small relative to Microsoft’s overall footprint. The company reported total greenhouse gas emissions of 15.5 million tonnes of carbon dioxide equivalent in fiscal year 2024 and has contracted around 22 million tonnes of carbon removals as part of its carbon-negative strategy.
The deal follows a series of recent carbon removal agreements signed by Microsoft, as well as similar moves by other technology firms. In January 2025, Google agreed to purchase 100,000 tonnes of carbon removal credits from Varaha, marking its largest biochar deal to date.
Founded in 2022, Varaha operates projects across India, Nepal and Bangladesh spanning biochar, regenerative agriculture, agroforestry and enhanced rock weathering, and works with around 150,000 farmers.
