Thermal insulation is an effective way to reduce the energy consumption of buildings.And it is friendly for environment because the reduction of energy consumption means less emission.In this paper，the transient heat transfer model was used to calculate the energy consumption caused by the heat transmission cross the exterior wall into room.P1-P2 economic model was used to analyze the life cycle total cost of exterior wall of residential building.The optimum thickness of the commonly used insulation materials including extruded polystyrene and expanded polystyrene was calculated with respect to East，South，West and North.The life cycle savings and payback periods were analyzed.The equivalent coal was calculated according to electricity consumption which is generated by the coal-fired power.Then the emission of CO2 and SO2 was estimated.The reduction potential of emissions was calculated when optimum insulation thickness was applied in comparison to un-insulated situation.Taking Changsha for example，the results show that the optimum insulation thickness is between 0.08 and 0.13m.The maximum life cycle saving varies from 116.26 to 133.45 yuan/m2.The payback period ranges from 3.1 to 3.5 years.The economic performance of expanded polystyrene is better than that of extruded polystyrene according to the economic indexes.The emission of CO2 can be reduced by 17.4~19.51 kg/m2 year，and the emission of SO2 can be reduced by 0.036~0.04 kg/m2year.The emissions can be reduced by 74.5~78.6%.