Microsoft’s India Carbon Deal: A Climate Tech First and the Future of Biochar
Microsoft has recently announced a landmark deal with Indian climate tech startup Varaha, committing to purchase over 100,000 tons of carbon dioxide removal (CDR) credits over the next three years, extending through 2029. This agreement represents the tech giant’s inaugural carbon removal investment in Asia, a strategically important move as the burgeoning demand from Artificial Intelligence (AI) drives up energy consumption and, consequently, greenhouse gas emissions. The deal underscores a growing trend: large corporations are increasingly turning to innovative carbon removal projects to offset their environmental impact and achieve ambitious sustainability goals.
The Varaha Project: Transforming Agricultural Waste into a Climate Solution
At the heart of this partnership lies Varaha’s innovative approach to carbon removal: converting cotton crop waste – traditionally burned after harvest – into biochar. Biochar, a charcoal-like substance, is a remarkably stable form of carbon that can be incorporated into soil, effectively sequestering carbon for extended periods. Beyond carbon sequestration, this process significantly reduces air pollution caused by open-field burning, a major environmental concern in agricultural regions. The initial phase of the project will focus on the western Indian state of Maharashtra, directly benefiting approximately 40,000 to 45,000 smallholder farmers.
What is Biochar and Why is it Important?
Biochar isn’t just about burying carbon; it’s a powerful soil amendment. It improves soil fertility, enhances water retention, and reduces the need for chemical fertilizers. This dual benefit – carbon removal and agricultural enhancement – makes biochar a particularly attractive solution for sustainable development. The long-term stability of carbon in biochar is crucial; unlike some carbon offset projects, biochar offers a durable and verifiable carbon sink.
The Rise of Carbon Removal and Microsoft’s Carbon Negative Ambitions
The Microsoft-Varaha deal is symptomatic of a broader trend: a surge in corporate investment in carbon removal technologies. Companies like Microsoft are facing increasing pressure to not only reduce their emissions but also actively remove existing carbon dioxide from the atmosphere. Microsoft is committed to becoming carbon negative by 2030, a bold target that requires substantial investment in CDR projects. However, recent reports indicate that Microsoft’s total greenhouse gas emissions increased by 23.4% in fiscal year 2024 compared to a 2020 baseline, largely due to the energy demands of its expanding cloud and AI businesses. Carbon removal credits are therefore becoming an increasingly vital component of their strategy.
India: An Emerging Hub for Carbon Removal Projects
The rapid expansion of AI and its associated energy demands are pushing companies to look beyond traditional carbon offset markets, like the US, for scalable and cost-effective carbon removal solutions. India has emerged as a particularly attractive location for these projects due to several key factors:
- Abundant Agricultural Waste: India generates massive volumes of agricultural residue, providing a readily available feedstock for biochar production and other carbon removal technologies.
- Large-Scale Farming Economy: The sheer scale of India’s agricultural sector offers the potential for widespread impact.
- Cost-Effectiveness: Compared to developed nations, labor and land costs in India can be lower, making carbon removal projects more economically viable.
Varaha’s Scalability and Technological Innovation
Varaha plans to deploy 18 industrial reactors over the next three years, each operating for 15 years. The company projects a total carbon dioxide removal volume exceeding 2 million tons over the project’s lifetime. What sets Varaha apart isn’t just the technology itself, but its ability to reliably deliver verified carbon credits at scale. According to co-founder and CEO Madhur Jain, Varaha is now the world’s second-largest player in durable carbon deliveries, a key factor in attracting Microsoft’s investment.
Challenges and Solutions in Scaling Biochar Production
Scaling biochar production isn’t without its challenges. It’s not simply about installing reactors; it’s about ensuring consistent operation and navigating the complex process of issuing carbon credits. Varaha has addressed this by building bespoke digital monitoring, reporting, and verification (MRV) systems in-house. Working with tens of thousands of smallholder farmers in India presents unique logistical complexities compared to biochar projects in the US or Europe, where biomass is often concentrated at single industrial sites. Varaha’s team, with over 30% having a background in agriculture, has been instrumental in designing systems that are practical and effective in the Indian context.
Beyond Carbon Credits: Co-Benefits of the Varaha Project
The Microsoft-Varaha partnership offers benefits beyond simply removing carbon dioxide from the atmosphere. The project directly addresses the issue of open burning of cotton stalks, a significant contributor to seasonal air pollution in parts of India. Furthermore, the application of biochar to farmland improves soil health, reduces the reliance on chemical fertilizers, and potentially increases crop yields. These co-benefits enhance the overall sustainability and impact of the project.
Microsoft’s Expanding Carbon Removal Portfolio
Phil Goodman, Microsoft’s CDR program director, emphasized that the Varaha deal diversifies Microsoft’s carbon removal portfolio with a scalable and durable biochar project design. While the Varaha agreement is significant, it represents a relatively small portion of Microsoft’s overall carbon footprint. In FY2024, Microsoft’s total greenhouse gas emissions were 15.5 million metric tons of carbon dioxide equivalent. However, Microsoft has been actively increasing its investment in carbon removal, contracting for approximately 22 million metric tons of carbon removals in FY2024.
Recent carbon removal agreements signed by Microsoft include:
- AtmosClear’s Louisiana Project: A commitment to remove 6.75 million metric tons of carbon dioxide over 15 years.
- C2X Biofuels Plant: An agreement to purchase 3.6 million carbon removal credits from a biofuels plant in Louisiana.
Google Joins the Fray: Increasing Demand for Biochar Credits
Microsoft isn’t alone in its pursuit of carbon removal solutions. Google has also been actively signing carbon removal deals, driven by the energy demands of its own AI advancements. In January 2025, Google agreed to purchase 100,000 tons of carbon removal credits from Varaha, marking its largest biochar deal to date. This demonstrates the growing demand for high-quality carbon removal credits, particularly those generated through innovative technologies like biochar production.
Varaha’s Growth and Future Prospects
Since its inception in 2022, Varaha has rapidly scaled its operations, raising around $50 million in funding from investors including RTP Global, Omnivore, and Mirova. In 2025, the company processed approximately 240,000 tons of biomass, producing roughly 55,000-56,000 tons of biochar and generating around 115,000 credits, a significant increase from the 15,000-18,000 credits generated in the previous year. Varaha aims to at least double its 2025 throughput in 2026, processing around half a million tons of biomass and sequestering close to 250,000 tons of carbon.
Currently, Varaha has 20 projects across India, Nepal, and Bangladesh, encompassing regenerative agriculture, biochar, agroforestry, and enhanced rock weathering. These projects have the potential to sequester approximately 1 billion tons of carbon dioxide over their lifetimes. Varaha’s success story highlights the potential of climate tech startups to drive meaningful change and contribute to a more sustainable future.
The Microsoft-Varaha deal isn’t just a business transaction; it’s a signal that the carbon removal market is maturing and that innovative solutions, particularly those that benefit both the environment and local communities, are gaining traction. As AI continues to reshape the technological landscape, the demand for carbon removal will only intensify, creating opportunities for companies like Varaha to lead the way.