Two Fundamentally Different Ways to Heat a Building
A furnace and a heat pump solve the same problem — keeping a building warm — through fundamentally different physical processes, and that difference drives every other comparison between them. A gas or oil furnace generates heat by combustion: it burns fuel and transfers the combustion heat into circulating air, and its efficiency is capped by the chemical energy content of the fuel it burns — it can never output more heat energy than the fuel it consumes contains. A heat pump, as covered in how heat pumps work, doesn't generate heat at all — it moves existing heat from outdoor air into the building using a refrigeration cycle, which means it can deliver more heat energy to the building than the electrical energy it consumes, because most of the delivered heat was already outside, not created by the equipment.
Efficiency Metrics: COP vs. AFUE Aren't Directly Comparable Numbers
Furnace efficiency is rated in AFUE (Annual Fuel Utilization Efficiency), a percentage representing how much of the fuel's energy content ends up as usable heat versus lost up the flue. A modern high-efficiency condensing gas furnace reaches roughly 90–98% AFUE; older or non-condensing furnaces run lower, often 80% or below. AFUE is essentially fixed for a given furnace regardless of outdoor temperature, since combustion efficiency doesn't depend much on how cold it is outside.
Heat pump heating efficiency is rated in COP (Coefficient of Performance) — the ratio of heat energy delivered to electrical energy consumed — and, for shopping purposes, in HSPF2, a seasonal average. Because a heat pump is moving rather than generating heat, its COP is regularly 2–4, meaning it delivers 2–4 units of heat for every unit of electricity consumed — the equivalent of 200–400%+ "efficiency" in AFUE terms, a number that sounds implausible until you remember it's not creating that extra energy, just relocating it from outdoors. The catch, covered in depth in COP, SEER2, and HSPF2 explained, is that COP is not constant the way AFUE roughly is — it drops as outdoor temperature drops, because colder outdoor air has less accessible heat and the compressor has to work harder to extract it.
Operating Cost: It Depends Heavily on Climate and Local Utility Rates
Because a furnace burns fuel directly and a heat pump consumes electricity to move heat, comparing their operating costs isn't just an efficiency comparison — it's an efficiency comparison multiplied by the local price of electricity versus the local price of gas or oil, and those prices vary enormously by region. In a region with cheap electricity (often true where hydro or nuclear generation dominates) and a mild-to-moderate climate, a heat pump's high COP combined with low electricity rates typically beats furnace operating costs by a wide margin. In a region with expensive electricity and cheap natural gas, or in a genuinely cold climate where the heat pump's COP declines significantly for a large share of the heating season, the operating-cost advantage narrows and can flip toward the furnace, particularly for standard (non-cold-climate) heat pump equipment. There is no universally correct answer independent of location — this is a calculation that has to be run with local utility rates and regional design temperatures, not a rule of thumb that holds everywhere.
This is also why dual-fuel systems — a heat pump paired with a gas furnace as backup — exist as a middle path: the heat pump handles heating above its balance point (see what is a heat pump's balance point), where it's both efficient and cost-effective, and the furnace automatically takes over below that point, when the heat pump's efficiency and capacity have degraded enough that combustion heat becomes the more economical (and sometimes necessary) choice.
Installation Cost and Lifespan
A furnace-only system is typically the lower upfront-cost option, especially where gas service already exists at the building — furnace equipment itself is relatively inexpensive and installation is a mature, standardized process. A heat pump system, particularly one sized to handle a meaningful share of a cold climate's heating load without oversized backup, generally costs more upfront than a furnace, though heat pump costs have narrowed considerably as the equipment has scaled and as it increasingly shares a platform with central air conditioning (a heat pump replaces the need for a separate AC condenser, which offsets some of its added cost when a home would have needed cooling equipment anyway). Both furnaces and heat pump outdoor units have broadly comparable expected lifespans in the 15–20 year range with proper maintenance, though heat pump compressors that run near-continuously through both heating and cooling seasons can see somewhat more duty cycles over their life than an AC-only compressor that only runs in summer.
Emissions
A gas or oil furnace produces on-site combustion emissions (CO2 and combustion byproducts) at the point of use, every time it runs. A heat pump produces zero on-site combustion emissions — its emissions footprint depends entirely on how the electricity it consumes was generated, which varies by grid and time of day. In regions with a cleaner electricity grid (higher share of renewable, nuclear, or hydro generation), a heat pump's total emissions footprint is typically substantially lower than a combustion furnace's. In regions with a coal- or gas-heavy grid, the emissions advantage narrows, though it's rarely eliminated entirely because power plant combustion is generally more efficient and better emissions-controlled than distributed small-scale combustion in individual furnaces.
Making the Actual Decision
The practical decision comes down to three inputs that are specific to a given building and location: local electricity price versus gas/oil price, regional winter design temperature (how cold it actually gets, and for how much of the season), and whether the home would need central air conditioning anyway (in which case a heat pump displaces a purchase you'd make regardless). In genuinely cold climates where a standard heat pump's efficiency degrades significantly, a cold-climate heat pump or a dual-fuel heat-pump-plus-furnace configuration is often the more defensible engineering choice than either technology alone.