Microsoft has entered into an agreement with Indian startup Varaha, planning to purchase over 100,000 tons of carbon dioxide removal credits within the next three years, extending until 2029. This initiative is designed to expand its portfolio of carbon removal projects, aligning with the tech giant's rapidly growing artificial intelligence and cloud computing operations.

The project will convert agricultural waste, such as post-harvest cotton stalks that are often burned, into biochar—a substance similar to charcoal. Applying this biochar to soil facilitates long-term carbon sequestration while simultaneously reducing air pollution caused by open-field burning. The initial phase will concentrate on the state of Maharashtra in western India, with an anticipated reach covering approximately 40,000 to 45,000 smallholder farming families.

Currently, major corporations, including Microsoft, are increasing their investments in carbon removal projects, which are centered on technological methods for directly capturing carbon dioxide from the atmosphere. The Redmond-based software giant is progressing towards its goal of becoming carbon-negative by 2030. However, its total greenhouse gas emissions for fiscal year 2024 increased by 23.4% compared to the 2020 baseline, a surge primarily driven by emissions across its value chain resulting from the expansion of its cloud and AI businesses. Microsoft has not yet released carbon reduction progress data for 2025.

As the AI sector experiences explosive growth, leading to concurrent rises in energy consumption and carbon emissions, companies are being compelled to look beyond the United States for projects capable of removing atmospheric CO2. India, with its vast agricultural waste output and large-scale agrarian economy, is increasingly becoming a favored destination for such carbon removal initiatives.

In a joint statement released on Thursday, the two companies announced that Varaha will construct 18 industrial reactors, each with an operational lifespan of 15 years. According to the plan, the total carbon removal over the entire project lifecycle is projected to exceed 2 million tons.

Madhur Jain, Co-founder and CEO of Varaha, noted in an interview that a significant challenge in the current carbon removal market extends beyond the deployment of biochar production equipment; it lies in ensuring stable project operations and successfully navigating rigorous verification processes to obtain carbon credits. Varaha's capability to deliver carbon credits at scale has positioned it as the world's second-largest provider of long-term carbon removal services, a factor that also attracted Microsoft's interest.

Jain revealed to a technology blog that Microsoft imposed stringent requirements for the digital monitoring, reporting, and verification (dMRV) of the carbon removal project, necessitating Varaha to develop a custom, proprietary system in-house. He added that, compared to biochar projects in the US or Europe that rely on a single, centralized industrial biomass source, collaborating with tens of thousands of small farmers in India introduces significantly greater complexity in tracking and logistics.

"Over 30% of our team members have professional backgrounds in the agriculture sector," Jain stated, explaining that this team composition is a key advantage, enabling Varaha to design practical project solutions that are closely aligned with the real-world needs of farmers.

The first reactor for this project will be located near Varaha's 52-acre cotton research farm in Maharashtra. The startup is collaborating with local farmers to test solutions like soil amendment using biochar in actual field conditions. With support from the Microsoft partnership, Varaha plans to gradually roll out the construction of all 18 reactors across India's cotton belt.

Jain indicated that Varaha's biochar business has expanded rapidly over the past year. In 2025, the company processed approximately 240,000 tons of biomass, producing between 55,000 and 56,000 tons of biochar, which corresponded to the generation of about 115,000 carbon removal credits—a substantial increase from the 15,000 to 18,000 credits generated the previous year.

With the new contract in place, Varaha anticipates further business expansion. Jain stated that the company aims to at least double its biomass processing capacity to around 500,000 tons by 2026, targeting nearly 250,000 tons of carbon sequestration.

Currently, Varaha has 20 projects deployed across India, Nepal, and Bangladesh. Fourteen of these projects are in advanced stages, while the remaining six are in early phases. The project portfolio encompasses regenerative agriculture, biochar production, agroforestry, and enhanced rock weathering technologies, involving collaborations with roughly 150,000 farmers. Jain projected that over their operational lifespans of 15 to 40 years, these projects have the potential to sequester approximately 1 billion tons of carbon dioxide.

Beyond carbon credit trading, this new project has two additional primary objectives: reducing seasonal air pollution in parts of India caused by the open burning of cotton stalks, and improving soil health while reducing agricultural dependence on chemical fertilizers by incorporating biochar into the land.

Phil Goodman, Director of Carbon Direct Removal at Microsoft, said in a pre-prepared statement, "This procurement agreement adds diversity to Microsoft's carbon removal portfolio, and Varaha's biochar project solution offers both scalability and long-term durability."

Although the partnership with Varaha reflects Microsoft's strategic direction of diversifying its carbon removal investments, the volume of credits procured remains relatively limited when compared to the company's overall carbon footprint. Data shows that Microsoft's total greenhouse gas emissions for fiscal year 2024 reached 15.5 million tons of CO2 equivalent.

As part of its carbon-negative strategy, Microsoft contracted for a total of approximately 22 million tons of carbon removal in fiscal year 2024. In recent months, Microsoft has signed several large-scale carbon removal agreements, including support for a project by Heirloom in Louisiana (aiming to remove 6.75 million tons of CO2 over 15 years) and the acquisition of 3.6 million carbon removal credits generated by a biofuel plant operated by C2X, also in Louisiana.

Similar to Microsoft, the rapid advancement of artificial intelligence technology has also driven up energy consumption and emissions at Google, prompting it to actively sign carbon removal agreements. In January 2025, Google partnered with Varaha to purchase 100,000 carbon removal credits, which stood as Google's largest transaction related to biochar at the time.

Since its founding in 2022, Varaha has raised approximately $50 million through various financing instruments. Investors include the RTP Global fund, Omnivore VC fund, Orios Venture Partners, the Octave Wellbeing Economy Fund under IMC Pan Asia Alliance Group, and Norinchukin Bank. In November 2025, Mirowa, a French climate investment firm backed by Kering and other corporate investors, invested $30.5 million in Varaha to support the scaling of its regenerative agriculture projects.