Microsoft has signed an agreement with Indian startup Varaha to purchase more than 100,000 metric tons of carbon dioxide removal credits over the next three years through 2029, expanding its portfolio of carbon removal projects as it scales up its artificial intelligence and cloud computing operations.

The project will convert cotton crop residues — which are often burned in fields after harvest — into biochar, a charcoal-like substance that can be added to soil to store carbon for long periods while also improving soil health and reducing air pollution from open-field burning.

The initiative will initially focus on the western Indian state of Maharashtra and is expected to involve about 40,000 to 45,000 smallholder farmers, Varaha said.

Microsoft has been investing in a range of carbon removal technologies, including biochar, direct air capture and nature-based solutions, as part of its commitment to become carbon negative by 2030. The company has also been ramping up spending on data centres and computing infrastructure to support the rapid growth of AI services, which has increased its energy use and emissions footprint.

Varaha works with farmers and local partners to generate carbon credits by changing agricultural and land-use practices, and then sells those credits to corporate buyers seeking to offset residual emissions.