This study aims to show the importance of environmental costs, and the role of these costs to improve the quality of financial reporting in Libyan oil companies and offering the suggestions to develop it. To achieve the objectives of the study, the researchers developed a questionnaire contains (35) questions, distributed to (100) of the officials of the financial departments, auditing, and costs and the parties concerned with the preparation of financial reports, collected and used in the analysis, a one-sample T-test was used. It seems to the researchers that there was the presence of environmental awareness and the company's strategy towards environmental issues, the study also showed there are obstacles that limit the application of measurement and disclosure of environmental costs. Moreover, it seems to the researchers that the measurement models for environmental costs increase the company's commitment to environmental responsibilities. The results of the study also showed the presence of a statistically significant relationship between environmental costs and the increase in the quality of the financial reports. Finally, there was a statistically significant relationship between environmental costs and decision making. The study suggested some recommendations to develop the application of accounting for environmental costs and disclosure to provide appropriate information to rationalize and take decisions in the oil companies in Libya, as well as the need for companies to protect the environment and provide funding and support to preserve the environment.