Beaver dams and associated wetland habitat can significantly reduce flow velocity and even out the throughput of water following heavy rainfall. Beaver can thus play a substantial role in mitigating downstream flooding and erosion. By contrast water retention resulting from beaver activity can also help sustain flow from local water tables during dryer periods.

Both the above hydrological impacts are likely to assume increased local significance as climate change creates increasingly erratic rainfall patterns, with wetter winters and dryer summers.

Damming activity also traps sediment load and oxygenates water throughput, thus reducing the impact of pollution from agricultural or road run-off and moderating acidity levels.

Beaver activity may cause local flooding of tracks and roads both directly and from blockage of drainage. This can be addressed by a variety of management techniques.

See Economic Benefits (Environmental).