Microsoft Buys 100,000 Tons of Carbon Credits from Indian Firm Varaha

Microsoft has agreed to purchase more than 100,000 tons of carbon dioxide removal credits from Indian startup Varaha over the next three years, through 2029. The deal, announced this week, marks the tech company's first carbon removal purchase in Asia. It comes as Microsoft's energy use grows from AI and cloud services, pushing up its emissions. The project turns cotton crop waste in India into biochar, a charcoal-like material that locks carbon in soil for years and helps stop farmers from burning fields, which dirties the air.

Background

Varaha started in India to help small farmers make money from climate projects. The company works with farmers on better ways to grow crops that store carbon in soil. It also runs projects on biochar, tree planting, and spreading crushed rocks on fields to pull carbon from the air. Right now, Varaha has 20 projects in India, Nepal, and Bangladesh. These involve about 150,000 farmers and could remove up to 1 billion tons of carbon dioxide over 15 to 40 years.

The firm got attention last year when Google bought 100,000 tons of credits from them in January 2025. That was one of the biggest biochar deals at the time. Varaha also raised $30 million from investors to grow its farming projects across hundreds of thousands of hectares. Many on its team come from farming backgrounds, which helps them build systems that fit real farm life in India.

Microsoft aims to be carbon negative by 2030, meaning it wants to remove more carbon than it emits. But its emissions went up 23.4% in fiscal year 2024 from 2020 levels. That rise came mostly from its supply chain, tied to bigger data centers for AI. The company bought contracts for 22 million tons of carbon removals that year. It has made other big deals, like one for 6.75 million tons over 15 years in Louisiana and another for 3.6 million from a biofuels plant.

Key Details

The new project starts in Maharashtra, a key cotton area in western India. It will involve 40,000 to 45,000 smallholder farmers who often burn cotton stalks after harvest. Varaha will build 18 industrial reactors that run for 15 years. These will process crop waste into biochar, with a total capacity to remove over 2 million tons of carbon dioxide over the project's life.

How the Biochar Works

Farmers give their cotton stalks to the project. The waste goes into reactors to make biochar. This material goes back to fields, where it holds carbon long-term and improves soil. It cuts the need for chemical fertilizers and stops smoke from field burning, which worsens air quality each season. The first reactor sits next to Varaha's 52-acre cotton research farm in Maharashtra. There, they test biochar on real fields. The plan is to add more reactors across India's cotton belt.

Varaha handles tough parts like tracking carbon with digital tools that Microsoft requires. In India, this means dealing with many scattered farms, unlike big sites in the US or Europe. The company built its own systems for monitoring, reporting, and checking credits. It has become one of the top players in delivering biochar credits worldwide.

"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 CDR program director.

Varaha expects to process half a million tons of biomass in 2026, up from 2025. That could sequester about 250,000 tons of carbon. The firm runs other work too, like enhanced rock weathering, where fine rock powder spreads on farms to capture CO2.

What This Means

This deal shows big tech firms turning to Asia for carbon solutions. India's small farmers feed millions, and projects like this give them new income while fighting climate change. Biochar from waste tackles two problems: storing carbon and cleaning air from burns that affect cities like Delhi.

For Microsoft, it adds to a mix of removal methods. The company still faces big emissions from AI growth. Data centers use huge power, and more AI means more energy and heat-trapping gases. Deals like this help balance that, but the 100,000 tons is small next to its 15.5 million tons of emissions in 2024.

Varaha's success draws eyes to biochar and soil projects. Other companies may follow, especially as credits need to prove they last and measure right. The startup now leads in Asia for carbon projects. It plans more growth with new contracts. Farmers get steady pay, better soil, and less pollution. Over time, this could change how millions farm in the region.

Microsoft keeps signing large agreements to hit its 2030 goal. Google and others do the same as AI booms. Carbon removal markets grow fast, with biochar proving it can scale in places like India. The Varaha project runs 15 years, so credits will flow steadily. It sets an example for linking tech money to farm work.