Microsoft’s offtake agreement with Varaha for biochar-based carbon dioxide removal in India highlights a growing shift toward agricultural waste streams as a scalable, verifiable source of long-term removals, while also exposing the operational and integrity challenges that still define the sector.
Under the agreement, Varaha will deploy 18 industrial biomass gasification reactors across India’s cotton-growing regions, primarily in Maharashtra. Over a 15-year operating period, the project is expected to deliver more than 2 million metric tons of CO₂ removal through the production and long-term sequestration of biochar. While modest relative to global emissions, the scale is material within the biochar CDR market, which remains dominated by small, fragmented projects with limited durability guarantees.
The feedstock strategy is central to the project’s economics and credibility. Varaha sources cotton stalks from smallholder farms, where post-harvest residue is commonly treated as waste and often burned in open fields. This practice contributes significantly to regional air pollution, including fine particulate matter such as PM2.5. Redirecting this biomass into controlled gasification facilities reduces uncontrolled combustion while locking biogenic carbon into a stable solid form that can persist in soils for centuries under appropriate conditions.
Biochar’s appeal within carbon markets lies in this permanence profile. Unlike avoided emissions or short-lived biological sinks, properly produced and applied biochar can offer storage on multi-century timescales, placing it closer to geological sequestration in durability classifications. That durability, however, depends on process control, feedstock consistency, and post-production handling, all of which increase capital and operational complexity compared with nature-based offset projects.
The project’s design integrates these technical requirements with an agricultural participation model. Farmers are compensated not only for supplying biomass but also for adopting residue management and soil application practices that incorporate biochar into fields. These practices can improve soil structure and water retention, potentially increasing yields over time, though outcomes vary by soil type and climate. While such co-benefits are frequently cited, they remain secondary to the carbon accounting framework that underpins credit issuance.
From a market perspective, Microsoft’s involvement is less about near-term volume and more about portfolio composition. Corporate buyers seeking to neutralize residual emissions are increasingly prioritizing removal credits with high durability and strong measurement, reporting, and verification protocols. Biochar projects that can demonstrate traceable feedstocks, controlled production, and monitored soil application are better positioned to meet these criteria than many land-use-based alternatives.
Asia has so far captured a limited share of global durable CDR investment, despite abundant biomass resources. The Varaha project signals a potential rebalancing, showing that industrial-scale biochar deployment can be structured around smallholder agriculture without relying solely on large plantations or centralized industrial waste streams. At the same time, the reliance on distributed feedstock collection introduces logistical risks that could affect consistency and cost, particularly as projects scale beyond pilot clusters.
The first reactor will operate adjacent to Varaha’s cotton research farm in Maharashtra, where agronomic performance and soil impacts are tested under field conditions. This research component is critical, as long-term soil carbon stability and agronomic outcomes directly affect both credit integrity and farmer participation. Scaling to 18 reactors will test whether these localized models can be replicated across India’s cotton belt without diluting quality controls.
For carbon markets, the agreement underscores a broader trend. Demand is consolidating around fewer buyers with stringent quality thresholds, while supply is gradually shifting from avoidance-based credits toward engineered and hybrid removal solutions. Biochar occupies an intermediate position, combining biological carbon uptake with engineered stabilization. Whether it can scale rapidly enough to meet growing corporate demand will depend on feedstock availability, regulatory clarity, and the ability to maintain consistent verification across decentralized agricultural systems.
