We use the BP oil spill to provide new evidence regarding the consequences of, and motivations for, environmental disclosures. We find that among oil and gas firms drilling in US waters, those with greater environmental disclosure suffered smaller negative shareholder wealth effects following the spill. This suggests that shareholders believed firms with more environmental disclosures were better prepared to address future environmental regulations and less likely to experience similar environmental incidents. We also document an increase in environmental disclosure, specifically disclosures of disaster readiness plans, in the year following the spill. Firms with poorer past environmental performance were more likely to increase disaster readiness plan disclosures. The increased disclosure by the poor pre‐spill environmental performers is not entirely window dressing, as their post‐spill environmental performance improved. The totality of our evidence is most consistent with the voluntary disclosure theory of environmental disclosure.