©2015 Green Building Advisor. From The Taunton Press, Inc., publisher of Fine Homebuilding Magazine.
UPDATED on March 18, 2015
What’s the best way to install foam insulation on the outside of a wall?
Although GBAGreenBuildingAdvisor.com has published many articles and videos on the topic, we continue to receive frequent questions from readers asking how to install rigid foam sheathingMaterial, usually plywood or oriented strand board (OSB), but sometimes wooden boards, installed on the exterior of wall studs, rafters, or roof trusses; siding or roofing installed on the sheathing—sometimes over strapping to create a rainscreen. on exterior walls — so it’s time to provide a primer on the topic.
There are three major types of rigid foam: expanded polystyrene (EPSExpanded polystyrene. Type of rigid foam insulation that, unlike extruded polystyrene (XPS), does not contain ozone-depleting HCFCs. EPS frequently has a high recycled content. Its vapor permeability is higher and its R-value lower than XPS insulation. EPS insulation is classified by type: Type I is lowest in density and strength and Type X is highest.), extruded polystyrene (XPSExtruded polystyrene. Highly insulating, water-resistant rigid foam insulation that is widely used above and below grade, such as on exterior walls and underneath concrete floor slabs. In North America, XPS is made with ozone-depleting HCFC-142b. XPS has higher density and R-value and lower vapor permeability than EPS rigid insulation.), and polyisocyanurate. All brands of EPS and XPS sold in the U.S. include a brominated flame retardant — hexabromocyclododecane (HBCD) — that many environmentalists find worrisome .
Moreover, most green builders avoid using XPS because it is manufactured with a blowing agent with a very high global warming potential .
That leaves polyiso, which enjoys a reputation as the most environmentally friendly type of rigid foam insulation. However, polyiso doesn’t perform very well at cold temperatures. (For more information on this issue, see In Cold Climates, R-5 Foam Beats R-6 .) The bottom line: green builders in hot climates tend to prefer polyiso, while green builders in cold climates tend to prefer EPS.
If you prefer not to use rigid foam, you can use mineral wool panels instead; for more information on this option, see Installing Mineral Wool Insulation Over Exterior Wall Sheathing .
If you are building a new home, there are two basic ways to install rigid foam on the exterior of a wall: The foam can either be attached directly to the studs, or the walls can be conventionally sheathed with OSB or plywood before the foam is installed.
If you decide to omit some or all of the OSB or plywood sheathing, you’ll need to come up with a plan to brace your walls. There are at least four ways to brace a foam-sheathed wall:
For more information on wall bracing, see Four Options for Shear Bracing Foam-Sheathed Walls .
If you decide to install rigid foam insulation after your walls are conventionally sheathed with OSB or plywood, you don’t have to worry about special bracing details. However, you need to be sure that your foam is thick enough to keep the OSB or plywood above the dew point during the winter. To determine the minimum R-valueMeasure of resistance to heat flow; the higher the R-value, the lower the heat loss. The inverse of U-factor. of the rigid foam, see Calculating the Minimum Thickness of Rigid Foam Sheathing .
Rigid foam is usually attached to studs or wall sheathing with cap nails , which can be purchased in a variety of lengths up to 8 inches. If you intend to install vertical 1x4 furring strips on top of the foam to create a rainscreenConstruction detail appropriate for all but the driest climates to prevent moisture entry and to extend the life of siding and sheathing materials; most commonly produced by installing thin strapping to hold the siding away from the sheathing by a quarter-inch to three-quarters of an inch. drainage gap, then you only need to install a few fasteners — just enough to hold the foam in place until the strapping is screwed to the wall.
If you are installing more than one layer of rigid foam — for example, two layers of 2-inch-thick polyiso — remember to stagger the seams of the second layer to improve airtightness and to reduce the chance of thermal bridgingHeat flow that occurs across more conductive components in an otherwise well-insulated material, resulting in disproportionately significant heat loss. For example, steel studs in an insulated wall dramatically reduce the overall energy performance of the wall, because of thermal bridging through the steel. . Seams between foam sheets should be sealed with caulk, canned foam, or a compatible tape.
Most foam-sheathed walls include vertical furring strips to create a rainscreen gap. Use 1x4s, which are less likely to split than 1x3s. Vertical furring strips should be installed directly over the studs, which means they will usually be 16 inches or 24 inches on center. The furring strips are attached to the studs with long screws through the foam. Some suppliers of long screws include:
If you need more information on how many screws to use, see Fastening Furring Strips to a Foam-Sheathed Wall .
More details on installing rigid foam on a new house can be found in a Fine Homebuilding article, Save Energy With Rigid-Foam Insulation .
The most popular material to use as a water-resistive barrierSometimes also called the weather-resistive barrier, this layer of any wall assembly is the material interior to the wall cladding that forms a secondary drainage plane for liquid water that makes it past the cladding. This layer can be building paper, housewrap, or even a fluid-applied material. (WRB) for a foam-sheathed wall is plastic housewrap. However, it's also possible to use the foam itself as a WRB.
If you want to use rigid foam as a WRB, you need to understand the code implications of your decision, and you need to have a good flashing plan. To learn more about this option, see Using Rigid Foam As a Water-Resistive Barrier .
If you are using housewrap as a WRB, you have to decide where to install it. The housewrap can either be installed under or over the foam. To learn more about these two approaches, see Where Does the Housewrap Go? 
There are several ways to install windows in a foam-sheathed wall. If your foam is relatively thin, it’s possible to nail or screw the window flanges through the foam to the rough framing. If the foam is thick, you’ll probably want to install a “picture frame” around the rough opening to provide secure nailing, or to install a cantilevered window buck (usually made out of plywood) to hold your window. If you go the window-buck route, you have two options: the windows can be installed as “innies” or “outies.”
If you're installing new windows as part of a deep-energy retrofit that includes rigid foam sheathing, you might want to use “Dudley boxes.” For more information on the Dudley box approach to window installation, see Window Installation Tips for a Deep Energy Retrofit .
A great resource containing lot of specific recommendations for installing windows in foam-sheathed walls is REMOTE: A Manual  from the Cold Climate Housing Research Center.
There are almost as many ways to flash windows in a foam-sheathed wall as there are window brands. The most important point: window flashings need to be integrated with your WRB. (If you aren’t sure whether your rigid foam or your housewrap is your WRB, that’s a sign of trouble.) Flashings should direct water to drain toward the exterior, usually to the rainscreen gap between the siding and the foam.
As a conceptual framework for your flashing plan, it's a good idea to remember this motto: “Flash the rough opening, not the window.” If the rough opening is waterproof, and if the rough sill directs rain to the exterior face of your WRB, you've done a good job.
Here are some GBA details for flashing “innie” windows:
Here are some GBA details for flashing “outie” windows:
More details showing flashing methods for both “innie” and “outie” windows can be found in a Journal of Light Construction article by Thorsten Chlupp, “Installing Exterior Insulation in Cold Climates.” 
If your house needs new siding, you have a rare opportunity to improve the thermal performance of your walls. Once your old siding has been removed, you can inspect the wall sheathing for rot or other problems, and these problems can be corrected. If necessary, dense-packed cellulose insulationThermal insulation made from recycled newspaper or other wastepaper; often treated with borates for fire and insect protection. can be installed in your wall cavities from the exterior.
Then you can install a layer of housewrap, followed by one or two layers of rigid foam and vertical furring strips. Of course, these new materials will add thickness to your walls. If you are installing new windows at the same time, you may want to install them as “outies” to simplify water management details.
If you keep your existing windows, they will end up being “innies,” and you’ll need to spend a lot of time detailing the flashing, the exterior jamb extensions, and the new window sill required for such an approach.
Here are some articles that can guide your plans to install rigid foam on an existing home:
The decisions outlined in this article make exterior foam sheathing sound more complicated than it really is. To get an overview of the steps involved in an easy-to-absorb way, check out these GBA videos:
Further details on this topic can be found in a 114-page manual funded by the U.S. Department of Energy's Building America program: Incorporating Thick Layers of Exterior Rigid Insulation on Walls .
Last week’s blog: “Air Sealing With Sprayable Caulk.”