Whenever there’s a difference in humidity between the conditioned space inside the building envelope and the atmosphere outside, there is a natural migration of moisture to the drier environment to equalize the humidity. The building envelope must be designed to minimize this process, so the humidity does not build up in the insulation, reducing its insulating capability and even causing condensation within the walls.
In cold climates, vapor barriers should be situated on the inside of a building, close to the heated space. This is to decrease the flow of water vapor into the insulation. The opposite holds true for hot and humid climates, to prevent moisture from flowing from the ambient air into the insulation.
In either case, a vapor barrier that is in poor condition allows moisture to build up in the insulation, reducing its effectiveness and increasing the energy needed for both heating and cooling the building. In many instances, the building finish is part of the vapor-barrier assembly. For a satisfactory barrier on the exterior wall, a finish is used that’s less permeable than any of the interior finishes or materials. The opposite should be done to simulate a vapor barrier on the inside wall.
In hot and humid climates, a quality vapor barrier does more than keep the insulation at its optimum. By minimizing the migration of water vapor into the conditioned space, the barrier prevents this excess latent load from burdening the HVAC system. This reduces the energy used to maintain comfort in the building.
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Excerpt from Energy Conservation Projects.