Cedar is supposed to keep closets moth-proof. If you have a lot of woolen clothes it would be nice. Plus it smells nice! The scent would not really wear off since it permeates the wood - you could probably scuff it lightly with fine grit sandpaper to revive the scent.

I have a large walk-in cedar coset in my house. The smell wore off years ago. It's also somewhat damp and I've seen spiders in it. That's because it's in my basement. I wouldn't build one in if I were you. I once bought a spray bottle of cedar oil, hoping to revive the smell, but the bottle is lost.

Spiders are fine, I suppose, and the dampness is supposed to be addressed by ventilation (either a louver-type door or a pair of vents  one on the bottom and one on top).

Does it really work against the moth, or does the moth-repelling property wear out along with the smell?

If the cedar smell wears off, who knows if it's still effective against moths? It would be be better to be safe with a moth product rather than hope that the cedar still works after a couple of years. Sanding would probably help, but who wants to do that? I think a clean, painted closet is a better bet IMHO>

Just be aware of the oil from timber staining clothes. I don't know if this would happen with cedar, but we once owned an old oak closet with just the natural untreated timber inside, and it left marks down the edges of the sleeves of our clothes.

If I had the choice to make, I'd leave the cedar off the walls. If you want the moth repellant capabilities of cedar, you could put some essential oil of cedar on a cotton ball and put it in a little dish in your closet. Same effect, PLUS you can renew it when it fades.

Spiders are fine, I suppose, and the dampness is supposed to be addressed by ventilation (either a louver-type door or a pair of vents  one on the bottom and one on top).

Does it really work against the moth, or does the moth-repelling property wear out along with the smell?

Cedar closets are wonderful. To revive the smell just lightly sandpaper the inside of the closet. I agree, I probably would not want one in the basement due to possible dampness with the low air exchange issue on a closed closet, but I'd love to have one upstairs.