There are a number of effective types of insulation that are used in construction. Batt and blanket insulation are the most common, but other well known types are blown-in insulation and spray-on foam insulation.
One class of insulation that is very affordable and efficient is foam board insulation. It can be used to insulate almost any part of your home, but is especially effective insulating cement basement walls and as exterior wall sheathing.
The following post explains why foam board or Styrofoam provides beneficial insulation value:
Why is styrofoam a good insulator? | Reference.com
Styrofoam works well as an insulator because it mostly consists of air confined to small pockets. These pockets hinder the convection process from carrying heat energy away from (or to) the substance inside the container.
Three different processes allow heat energy to flow: radiation, convection and conduction. Of these, conduction and convection are the two processes relevant to the use of Styrofoam. Conduction involves the flow of heat energy from a hotter object to a colder one. For example, a person picking up an ice cube notices that the ice cube melts in his hand as heat conducts from his hand to the cube. Convection involves a series of currents that emerge when a gas or liquid flows from a warmer place to a cooler one, or vice versa.
Even though that is a pretty technical explanation of why foam board provides good insulation, it basically comes down to the fact that it is the first line of defense against moisture and mold. That is why it works so well for basement walls.
In the following video, the contractor provides a step-by-step process of installing foam board in a basement before you frame out the walls:
So just how effective is foam board insulation? It really comes down to the R value, which is the capacity of the insulating material to resist heat flow. Some types are used as part of the foundation, which are filled with cement and remain as part of the wall assembly.
However, other kinds of rigid insulation foam boards and their R values vary. The main 3 types are Expanded Polystyrene Foam (EPF), Extruded Polystyrene Foam (XPS), and Polyisocyanurate (polyiso). The following post goes into more detail of the R value of these three types of insulation:
Foam Board Insulation – R Values and Types
Expanded polystyrene foam (EPS) is the cheapest and least used foam board product on the market. This product typically has an R value of 3.6 to 4.0 per inch of thickness.
Extruded Polystyrene Foam
Extruded polystyrene foam (XPS) also known as blue board or pink board comes in many different thicknesses and edge profiles. This insulation board is probably one of the most widely used foam board insulation products in the residential construction industry. XPS has an R value of 4.5 to 5.0 per inch of thickness.
Polyisocyanurate and Polyurethane
Polyisocyanurate also known as polyiso is seen in all kinds of commercial building applications and more recently with residential building projects. Polyiso is typically used with a foil facing and it has an R value of 7.0 to 8.0 per inch of thickness. The reflective foil facing makes it an excellent insulation board when radiant heat is involved. The foil facing also makes it very easy to seal with good quality foil faced tapes.
Read more here: Foam Board Insulation – R Values and Types
The biggest negative for using any Styrofoam products is the environmental effects. It isn’t biodegradable and when heated puts off fumes that aren’t healthy. As far as using foam board for insulation, though, I wasn’t able to find information related to this issue. As long as it isn’t subjected to high temperatures, it shouldn’t be a problem.