Northern peatlands play an important role in the global carbon cycle representing a significant stock of soil carbon and a substantial natural source of atmospheric methane (CH4). Peatland carbon cycling is affected by water table position which is predicted to be lowered by climate change. Therefore we compared carbon fluxes along a natural peatland microtopographic gradient (control) to an adjacent microtopographic gradient with an experimentally lowered water table (experimental) during three growing seasons to assess the impact of water table drawdown on peatland‐atmosphere carbon exchange. Water table drawdown induced peat subsidence and a change in the vegetation community at the experimental site. This limited differences in carbon dioxide (CO2) exchange between the control and experimental sites resulting in no significant differences between sites after three seasons. However, there was a trend to higher respiration rates and increased productivity in low‐lying zones (hollows) and this was coincident with increased vegetation cover at these plots. In general, CH4 efflux was reduced at the experimental site, although CH4 efflux from control and experimental hollows remained similar throughout the study. The differential response of carbon cycling to the water table drawdown along the microtopographic gradient resulted in local topographic high zones (hummocks) experiencing a relative increase in global warming potential (GWP) of 152%, while a 70% reduction in GWP was observed at hollows. Thus the distribution and composition of microtopographic elements, or microforms, within a peatland is important for determining how peatland carbon cycling will respond to climate change.