Is a heat pump cheaper to run than a gas furnace in Canada?

Operating cost depends on local gas and electricity prices. In Ontario with current rates, a heat pump operates at roughly $0.07-$0.09 per kWh of heat delivered vs $0.05-$0.07 per kWh-equivalent for natural gas — gas is still slightly cheaper to operate per BTU. In Quebec and BC where electricity is cheap, heat pumps beat gas on operating cost. In Atlantic Canada where heating is dominated by oil at $0.13-$0.16 per kWh-equivalent, heat pumps win decisively on operating cost.

What is the cheapest way to heat a home in Canada?

In 2026, ranked by per-kWh-of-heat operating cost: (1) heat pump in Quebec or Manitoba where electricity is below $0.10/kWh, (2) natural gas in provinces with low gas rates and electric carbon-pricing, (3) heat pump in Ontario, (4) heat pump replacing oil or propane anywhere, (5) electric baseboard, (6) oil, (7) propane. Adding the carbon-pricing trajectory through 2030 shifts heat pumps further ahead — federal carbon price on gas adds about $0.015/kWh-equivalent per year of increase.

Should I keep my gas furnace as backup if I install a heat pump?

Yes, in most Ontario and prairie installations. Dual-fuel setups let the heat pump handle 85-95% of heating hours (the warmer temperatures where it operates most efficiently) and the gas furnace handles the coldest 5-15% of hours where heat pump efficiency drops. This typically minimizes total annual heating cost versus an all-electric setup with electric resistance backup. Keep the furnace if it has more than 5 years of useful life remaining; replace both at once if the furnace is end-of-life.

How long does a heat pump last vs a furnace?

Average service life: gas furnaces 15-20 years, air-source heat pumps 12-15 years, geothermal heat pumps 25-30 years (the indoor components; ground loop is 50+ years). Heat pumps run more hours per year than furnaces because they handle cooling load too, which is why their service life is somewhat shorter than a furnace-only system.

Will the carbon price make my gas furnace much more expensive over the next decade?

The federal carbon-pricing schedule rises through 2030, adding roughly $0.015 per kWh-equivalent of gas heating per year of increase. By 2030, a typical 100 GJ/year Canadian gas furnace will pay an additional $400-$500/year in carbon-priced gas vs current 2026 rates. The federal government rebates much of this through the Canada Carbon Rebate (formerly Climate Action Incentive) to households, but the rebate is fixed per household and does not scale with home energy use — so high-gas-use households end up net-negative on the rebate while low-use households are net-positive.

What about the environmental impact?

In provinces with low-carbon electricity (Quebec, BC, Manitoba, Ontario), a heat pump produces 60-90% less CO2 per kWh of heat delivered than a natural gas furnace. In provinces with carbon-intensive electricity (Alberta, Saskatchewan, Nova Scotia), the gap narrows to 20-40% — still better than gas, but the grid composition matters. Provincial electricity grids are decarbonizing on a 5-15 year horizon, which gradually improves the environmental case for heat pumps over their service life.

Heat pump economics · Canada

Heat pump vs furnace in Canada: 10-year total cost compared

By Aroon Maharaj · Published 2026-05-20 · Updated 2026-05-20 · ~11 min read

This is the question most Canadian homeowners actually want answered: do the numbers favour a heat pump or sticking with the furnace? The accurate answer depends on which province you're in, what fuel your current furnace burns, the size and efficiency of your home, and the carbon-price trajectory through the next decade. This guide walks through a worked 10-year total-cost-of-ownership calculation for the four most common Canadian scenarios — gas furnace replacement, oil furnace replacement, electric baseboard replacement, and propane furnace replacement — using 2026 prices and the published federal carbon-pricing schedule.

What goes into a 10-year cost calculation

Total cost of ownership over 10 years includes:

Upfront equipment + install cost, net of all eligible rebates and grants (federal, provincial, utility).
Financing cost, if any. The federal Greener Homes Loan is interest-free, so this is zero for most heat pump installations. Conventional furnace financing typically adds 8-12% APR over 5 years.
Annual operating cost (fuel or electricity, year by year) including the published carbon-pricing trajectory.
Maintenance cost — annual tune-up, filter changes, any repairs in the 10-year window.
Replacement risk — heat pump or furnace life expectancy meeting or exceeding the 10-year window.
Cooling cost, since a heat pump replaces both furnace AND air conditioner. Often the heat pump comparison misses this and overstates the cost difference.

Scenario 1 — Gas furnace replacement in Ontario

Setup: 2200 sq ft Toronto home, current 95% AFUE gas furnace at end-of-life (15 years old). Existing AC also end-of-life. Two options: (A) replace both with a new gas furnace + new AC, (B) install a dual-fuel cold-climate heat pump that replaces both.

Option A — New gas furnace + new AC

Equipment + install: $7,500 (mid-range 96% AFUE gas furnace) + $4,500 (mid-range 16 SEER AC) = $12,000 total upfront. No federal rebates available.
Annual heating cost (gas, ~100 GJ/year at $0.30/m³ base rate plus carbon price): $1,650 in 2026, rising to $2,080 by 2030 due to carbon price escalation.
Annual cooling cost (electricity, ~2200 kWh at $0.11/kWh): $240/year, relatively stable.
Maintenance: $150/year furnace tune-up, $120/year AC maintenance.
10-year total: $12,000 upfront + $18,300 operating + $2,700 maintenance = $33,000.

Option B — Dual-fuel CCHP + existing furnace as backup

Equipment + install: $16,000 (4-ton ducted CCHP installed). Greener Homes Loan: $16,000 interest-free over 10 years. Ontario Home Renovation Savings rebate: $5,000. Net upfront cash: $0 (loan covers full install; rebate received as cheque). Loan payments: $133/month × 120 months = $16,000.
Annual heating cost (mostly electricity for heat pump above -10°C, gas furnace below): $1,200/year for combined heating, rising to $1,300 by 2030 (electricity inflation lower than gas).
Annual cooling cost: same heat pump provides cooling, so essentially $0 incremental.
Maintenance: $200/year heat pump + furnace combined tune-up.
10-year total: $0 upfront cash + $16,000 loan repayment + $12,500 operating + $2,000 maintenance − $5,000 rebate = $25,500.

Difference: $7,500 in favour of the heat pump over 10 years. Plus the heat pump retains the existing gas furnace, so there's no furnace-replacement risk during the 10-year window. The all-electric carbon-pricing exposure decreases gradually as Ontario's already-low-carbon grid decarbonizes further. Worth noting: in year 1, the heat pump option costs roughly $200/month more in combined loan-and-heating-bill vs heating-bill-alone for gas, but by year 4 the carbon-priced gas bill catches up and the heat pump option becomes cash-positive monthly.

Scenario 2 — Oil furnace replacement in Nova Scotia

Setup: 1800 sq ft Halifax home, current oil furnace at end of life. Household income $58,000 (qualifies for OHPAP). Two options: (A) replace oil with new oil furnace, (B) install all-electric CCHP and decommission oil tank.

Option A — New oil furnace

Equipment + install: $7,500 (mid-range 85% AFUE oil furnace).
Annual heating cost (700L oil/year at $1.40/L 2026 baseline, escalating with carbon price): $980/year heating + carbon adder rising to roughly $1,300/year by 2030.
Maintenance: $250/year (oil tune-up + tank inspection + filter changes).
10-year total: $7,500 upfront + $11,500 operating + $2,500 maintenance + ~$1,500 for oil-tank replacement in year 8 = $23,000.

Option B — All-electric CCHP, oil tank decommissioned

Equipment + install: $20,000 (4-ton ducted CCHP + electric backup). OHPAP grant: $10,000. Nova Scotia HomeWarming: $5,000. Greener Homes Loan: remaining $5,000 covered interest-free. Net upfront cash: $0. Loan payments: $42/month × 120 months = $5,000.
Annual heating cost (mostly electricity for heat pump, minimal resistance backup): $1,300/year.
Maintenance: $200/year combined.
10-year total: $0 upfront cash + $5,000 loan repayment + $13,000 operating + $2,000 maintenance = $20,000.

Difference: $3,000 in favour of the heat pump over 10 years. More important: the annual operating cost falls by $1,300/year immediately. Annual oil bills for an 1800 sq ft Halifax home routinely run $3,000-$4,200/year before carbon-price escalation; the post-conversion electricity-for-heat bill is typically $1,200-$1,500. For an oil-heated household at the OHPAP income threshold, the conversion is the single highest-return home improvement available in Canada.

Scenario 3 — Electric baseboard replacement in Quebec

Setup: 1400 sq ft Sherbrooke home, current electric baseboards at end-of-life (40 years). Hydro-Quebec rate roughly $0.075/kWh. Two options: (A) replace baseboards with new high-efficiency electric baseboards, (B) install ductless multi-zone CCHP.

Option A — New electric baseboards

Equipment + install: $4,500.
Annual heating cost (8,500 kWh × $0.075/kWh): $640/year, very stable (Quebec electricity rates have low long-term inflation).
Maintenance: minimal, $0-$50/year.
10-year total: $4,500 upfront + $6,400 operating = $10,900.

Option B — Ductless multi-zone CCHP

Equipment + install: $13,000 (3-ton ductless multi-zone, 1+3 heads). Quebec Rénoclimat rebate: $4,200. Greener Homes Loan: balance covered interest-free. Net upfront cash: $0. Loan payment: $73/month × 120 months = $8,800.
Annual heating cost (3,300 kWh × $0.075/kWh, seasonal COP 2.6): $250/year.
Maintenance: $150/year.
10-year total: $0 upfront + $8,800 loan + $2,500 operating + $1,500 maintenance = $12,800.

Difference: $1,900 against the heat pump over 10 years. Quebec is the one province where the straight-line economics of going from baseboard to heat pump are close to neutral, because electricity is so cheap. However: the heat pump also delivers cooling (Sherbrooke summers are increasingly hot, and a CCHP replaces a future AC purchase of ~$3,500), and the comfort improvement from multi-zone ductless is substantial vs uneven baseboard heating. Most Quebec homeowners who do this conversion cite comfort + cooling capability as the deciding factor rather than direct heating-cost savings.

Scenario 4 — Propane furnace in rural Saskatchewan

Setup: 2000 sq ft rural home outside Saskatoon, current propane furnace, propane delivered at $1.10/L. Two options: (A) replace propane furnace, (B) install dual-fuel CCHP with propane backup.

Option A — New propane furnace

Equipment + install: $9,500.
Annual heating cost (1,400L propane/year at $1.10/L, plus delivery + carbon price): $1,800/year, rising to ~$2,400 by 2030.
Maintenance: $200/year.
10-year total: $9,500 + $20,000 operating + $2,000 maintenance = $31,500.

Option B — Dual-fuel CCHP + propane furnace as backup

Equipment + install: $18,000 (4-ton ducted CCHP). Saskatchewan has limited provincial rebates ($1,500). Greener Homes Loan: balance interest-free. Net upfront cash: $0. Loan payment: $138/month × 120 months = $16,500.
Annual heating cost (mostly SaskPower electricity at $0.15/kWh for heat pump above -15°C, propane below): $1,400/year, stable.
Maintenance: $250/year combined.
10-year total: $0 upfront + $16,500 loan + $14,000 operating + $2,500 maintenance − $1,500 rebate = $31,500.

Roughly neutral over 10 years, slight edge to heat pump as carbon prices escalate. Saskatchewan electricity is moderately expensive and propane is moderately cheap, so the heat pump economics are tighter than in oil-heavy provinces. The deciding factor is usually whether you also need cooling — Saskatchewan summers reach 35°C regularly, and a CCHP replaces a future AC purchase.

Carbon pricing trajectory through 2030

The federal carbon price on fossil fuels follows a published schedule. As of 2026 the price is $80/tonne CO2-equivalent, rising $15/year to reach $170/tonne by 2030 and then expected to escalate further to meet 2050 net-zero targets. On natural gas this adds roughly $0.30 per cubic metre to the consumer price by 2030 ($0.018/kWh-equivalent). On heating oil it adds roughly $0.20/L. On propane it adds roughly $0.15/L.

For a typical 100 GJ/year Canadian gas-heated home, the carbon-price escalation alone adds $400-$500/year to the gas bill by 2030. The federal government offsets some of this with the Canada Carbon Rebate paid to households, but the rebate is fixed per household (around $1,000-$1,800 depending on province and family size) and does not scale with consumption. High-gas-use households are net-negative on the rebate; low-use households are net-positive. Heat pumps directly reduce the gas use, which is the variable that matters most for the household-level math.

Electricity carbon-pricing exposure varies dramatically by province. Quebec, BC, and Manitoba have nearly zero electricity-grid CO2 intensity, so electricity rates are essentially insulated from the carbon-price escalation. Ontario's grid is mostly low-carbon (nuclear + hydro + renewables), so electricity inflation has been below 2% annually for the last decade. Alberta and Saskatchewan have higher-carbon grids and electricity inflation has tracked slightly above general inflation. The 10-year operating-cost calculations above use province-specific electricity-rate trajectories.

When sticking with the furnace makes sense

Three scenarios where a furnace replacement beats a heat pump:

Existing furnace has 5+ years of useful life remaining. Replacing a working furnace before it fails leaves residual value on the table. Either schedule the heat pump for when the furnace is end-of-life, or do the install now and keep the furnace as backup (cheaper than disposing of it).
Home is in a remote area with very high electricity rates and very low fuel costs. A few rural areas of Saskatchewan and Manitoba have electricity rates above $0.20/kWh combined with stable bulk fuel pricing. The heat-pump operating-cost calculation can be neutral or slightly negative in these specific situations.
Home envelope is so leaky that heat pump sizing becomes unreasonable. A 1920s uninsulated home in Winnipeg with ACH50 above 12 has heat loss so high that the required heat pump capacity exceeds what's commercially available (or pricing makes envelope upgrades the better first move). In these cases, do air sealing + insulation first, then revisit heat pump economics in 18-24 months.

Get a quote with the full 10-year math

Every installer in our directory provides a full lifecycle cost comparison in their quote — not just upfront pricing. The comparison includes your specific home's heating load, your current heating fuel and rate, your provincial rebate stack, the federal Loan economics, the carbon-pricing trajectory, and the equipment-life replacement risk.

Get a free quote within 24 hours

Sources

Natural Resources Canada Greener Homes Loan program documentation. Statistics Canada household energy use data, table 38-10-0006-01. Canada Energy Regulator (CER) — provincial residential gas and electricity rate data. Federal carbon-pricing schedule and Canada Carbon Rebate published amounts. Provincial rebate program documentation (Nova Scotia HomeWarming, Ontario Home Renovation Savings, Quebec Rénoclimat). NRC's Heating, Cooling and Process Industries handbook for service-life estimates. Last full source check: 2026-05-20.