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Abstract: Our understanding of the hydrodynamic response of peatland to climate change is restricted to the Holocene, which confines our knowledge of the fundamental controls on this important carbon reservoir to recent sedimentary successions. To understand the interaction of peatland hydrodynamics, climate and the carbon cycle on longer time scales, a 95.4 m record from lower Miocene lignite from the Gippsland Basin, Australia is considered. δ 13C and colour records for the lignite were created by analysing samples every 0.1 m. Solid-state 13C NMR results indicate that lignite colour is related to the relative abundance of aliphatic carbon. The lack of a direct correlation between colour and δ 13C demonstrates that the δ 13C signal has not been significantly influenced by the diagenetic processes that produce the colour. An offset correlation occurs between δ 13C and colour with the degree of offset decreasing from 4.5 m at the base to about 0 m at the top. This offset is considered to represent a zone of surface influence that extends up to 20 m below the peat surface. Using numerical modelling we demonstrate that this zone of surface influence and its gradual decline in thickness could arise as a consequence of enhanced fluid flow in regions of high tensile stress within the unconfined peat body. The removal of lignin and its derivatives from the zone of surface influence will be favoured by cooler drier periods, with lower sea level and high hydraulic gradients across the peatland. Therefore in the early Miocene this peatland acted as a carbon source during global cooling. [Copyright &y& Elsevier]