©2015 Green Building Advisor. From The Taunton Press, Inc., publisher of Fine Homebuilding Magazine.
Here at GBAGreenBuildingAdvisor.com, we regularly receive questions from readers about the best way to insulate a basement wall. Since these questions pop up frequently, it’s time to pull together as much information as possible on this topic.
In this article, I’ll try to explain everything you always wanted to know about insulating basement walls.
If you live in Climate Zone 3 or anywhere colder, it’s cost-effective and wise to install basement wall insulation. This advice applies to those who live in most of New Mexico and most of Alabama, as well as all of Oklahoma, Arkansas, and South Carolina, and anywhere colder than these states. (Click here  to see a climate zone map.)
Canadian researchers  who studied basement insulation methods and costs in five Canadian locations (Toronto, Ottawa, Halifax, Edmonton and Victoria) concluded that “for all types and sizes of basements assessed in this study, the lowest total life-cycle cost was associated with basements insulated internally, full-height to a nominal level of R-20.”
How much money will basement insulation save you annually? According to a report published by the U.S. Department of Energy , the annual savings attributable to R-20 basement insulation in a 1,500-square-foot home ranged from $280 per year in Washington, DC to $390 per year in Buffalo, New York, assuming that natural gas costs $0.72/thermUnit of heat equal to 100,000 British thermal units (Btus); commonly used for natural gas.. (However, energy consultant Michael Blasnik cites two Minnesota studies that show lower levels of savings. See his 6/29/12 comments posted below.)
All About Basements 
The 2012 International Residential Code requires basement insulation in Climate Zones 3 and higher. Here are the minimum code requirements for basement wall insulation — assuming that you are insulating with foam, not fiberglass batts:
I used to believe that the best location for basement wall insulation was on the exterior. In recent years, however, I’ve decided that interior basement insulation makes a lot of sense.
However, there are valid reasons for both approaches, and either way can work fine. So if you prefer one approach, don’t hesitate to use it.
Here are the advantages of exterior basement insulation:
Here are the advantages of interior basement insulation:
After the basement wall has been protected with a dampproofing or a waterproofing system, insulation is installed from the top of the footing to somewhere near the top of the rim joist. Acceptable insulation materials include 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.), expanded polystyrene (EPS), closed-cell spray polyurethane foam, or mineral wool. Polyisocyanurate insulation should not be used because it can absorb water.
Below-grade insulation does not need to be attached to the concrete; it is held in place by the backfill. The best backfill material is a fast-draining granular material like gravel or crushed stone with a thin cap of soil or clay.
Above-grade insulation may or may not need to be attached to the concrete — fastening methods include foam-compatible adhesive, TapCons with washers, and specialty fasteners like Hilti IDP fasteners  or Rodenhouse Plasti-Grip PMF fasteners  — depending on the height of the exposed foam and the method used to protect it.
Some builders cantilever their 2x6 perimeter walls so that the basement insulation isn't proud of the siding. If the basement insulation ends up proud of the siding, you'll have to protect the top of the basement insulation with metal flashing. The top of the flashing needs to include a vertical leg that extends upward and is lapped by the housewrap; the flashing should be sloped, and the bottom of the flashing needs to terminate in a drip leg that extends beyond the insulation and the insulation protection materials.
The above-grade portions of all types of exterior insulation must be protected from physical abuse and sunlight. Among the products than can be used for this purpose are the following:
For more information on this topic, see How to Finish Exterior Foundation Insulation .
The best way to insulate a basement wall on the interior is with foam insulation that is adhered or attached directly to the concrete. Any of the following insulation materials are acceptable for this purpose: closed-cell spray polyurethane foam, XPS, EPS, or polyisocyanurate.
Rigid foam can be adhered to concrete with foam-compatible adhesive or can be attached with special fasteners like Hilti IDP fasteners  or Rodenhouse Plasti-Grip PMF fasteners . (For more information on using Hilti IDP fasteners to attach rigid foam to a basement wall, see Marc Rosenbaum’s article, Basement Insulation — Part 2 . For more information on Rodenhouse Plasti-Grip PMF fasteners, see New Green Building Products — June 2013 .) To prevent interior air from reaching the cold concrete, make sure to seal the perimeter of each piece of rigid foam with adhesive, caulk, a high-quality European tape, or canned spray foam.
Building codes require most types of foam insulation to be protected by a layer of gypsum drywall. Many builders put up a 2x4 wall on the interior of the foam insulation; the studs provide a convenient wiring chase and make drywall installation simple. (If you frame up a 2x4 wall, don't forget to install fire blocking at the top of the wall. For more information on fire blocking, see Fire-Blocking Basics .)
One brand of rigid foam, Dow Thermax polyisocyanurate , meets code requirements for a thermal barrier and can therefore be left exposed in a crawl space (and in some jurisdictions, in a basement) without the need for a layer of gypsum drywall. If your basement doesn’t need wiring, studs, and drywall, then Thermax is probably the brand of insulation to use. (However, be sure to check with your local building official before going this route.)
If you plan to insulate your basement walls with spray foam, the best approach is to frame your 2x4 walls before the foam is sprayed, leaving a gap of 1 to 2 inches between the back of the studs and the concrete wall. The gap will later be filled with spray foam.
For information on insulating rim joists, see Insulating Rim Joists .
If you live in an area where termites are a problem, your local building code may require that you leave a 3-inch-high "inspection strip" of bare concrete near the top of your basement wall. To find out what details are required in your area, talk to your local building official.
No. Fiberglass batts, mineral wool batts, and cellulose are air-permeable. When this type of insulation is installed in contact with concrete, the moisture in the interior air condenses against the cold concrete surface, leading to mold and rot. That’s why I advise builders that fiberglass batts, mineral wool insulation, and cellulose should never be installed against a basement wall.
The risk of moisture problems is reduced if the concrete is first covered with a continuous layer of rigid foam or closed-cell spray foam. If that is done, some builders then install a 2x4 wall on the interior side of the foam insulation and fill the stud bays with fiberglass batts. This approach is less risky than installing fiberglass directly against the concrete. However, I don’t think that fiberglass batts belong in a basement. My advice: if you want a higher R-valueMeasure of resistance to heat flow; the higher the R-value, the lower the heat loss. The inverse of U-factor. , just install thicker rigid foam, and leave the stud bays empty.
No. The idea that a damp concrete wall should be able to dry towards the interior — in other words, that any insulation on the interior of a basement wall should be vapor-permeable — is mistaken. In fact, you don’t want to encourage any moisture to enter your home. Your concrete wall can stay damp for a century; that dampness won’t hurt the concrete.
For more information on this topic, see Joe Lstiburek Discusses Basement Insulation and Vapor Retarders .
No. Basement wall systems should never include any polyethylene. You don’t want poly between the concrete and the insulation; nor do you want poly between gypsum drywall and the insulation. You don’t want poly anywhere.
Paul Ellringer, an energy and mold consultant in Saint Paul, Minnesota, has a collection of slides showing moldy basement insulation. In most cases, these basement walls were insulated with fiberglass batts, and included two layers of polyethylene — one on each side of the studs. Ellringer calls this a “diaper wall,” and reports that most of them are a mess. “Fibrous insulation and poly are inherently problematic, and should not be used in below-grade walls,” says Ellringer. “Sometimes when you open it up, the fiberglass is soaking wet. If the house is two to four years old, the studs are often beginning to rot.”
If you build a new basement with insulated concrete forms (ICFs) or the ThermoMass system , your wall already includes insulation, so you don’t need to add any more.
Both approaches work. The main disadvantage of these systems is their high cost compared to conventional poured concrete walls.
ICFs have a core of concrete sandwiched between two layers of rigid foam. ThermoMass walls have a core of rigid foam sandwiched between two layers of concrete. It seems to me that the ThermoMass sandwich makes much more sense than the ICF sandwich: since foam is more fragile than concrete, it makes more sense to protect the fragile layer with concrete than to put the fragile material on the outside of the sandwich.
If you decide to use either ICFs or the ThermoMass system, pay close attention to the wall’s R-value. Many ICF and ThermoMass walls have relatively low R-values. If you’re going to buy such an expensive wall system, be sure to specify thick foam.
If you want to insulate an existing basement, you’ll probably be working from the interior. Before installing a layer of foam insulation on an existing wall, the first step is to verify that the basement wall doesn’t have a water-entry problem.
Diagnosing and fixing water-entry problems in existing basements is a big topic in its own right, and is beyond the scope of this article. Suffice it to say that if your basement walls get wet every spring or every time you get a heavy rain, the walls should not be insulated until the water-entry problem is solved.
Among the possible solutions to this problem:
For more information on these issues, see Fixing a Wet Basement .
If your basement has stone-and-mortar walls, you can’t insulate the walls with rigid foam. The only type of insulation that makes sense for stone-and-mortar walls is closed-cell spray polyurethane foam.
If your basement has poured concrete or concrete-block walls, you can proceed with the same methods used for new construction — as long as you’re sure that the walls don’t have a water-entry problem.
Crawl space walls should be insulated with the same methods used for basement walls. For more information on insulating a sealed crawl space, see Building an Unvented Crawl Space .
Remember: if you live in Climate Zone 3 or anywhere colder, installing basement wall insulation is almost always cost-effective. Performing this work will lower your energy bills, and will also provide an important side benefit: insulated walls are less susceptible to condensation and mold.
That means that insulated basements stay dryer and smell better than uninsulated basements.
Last week’s blog: “Understanding Energy Units.”