Question: Can I place a vapor retarder on top of wood chips and add fiberglass insulation?
Answer: Yes, but - When insulating on top of existing insulation we recommend the use of unfaced insulation so no vapor retarder will be on top of the original insulation. We also do not recommend adding a separate vapor barrier on top of existing insulation.
With that in mind, the approach you describe should also work because a vapor retarder can be anywhere up to one-third of the total thermal resistance in the assembly starting from the warm side. Two-and-a-half inches of wood chips will provide R 4, at best, and one-third of R-40 is R-12. The vapor retarder can go in as far as R-12 in the assembly you describe, so in this case it is OK.



