Outdoor wood-burning furnaces carry a risk of starting a fire, and also release carbon monoxide and other dangerous chemicals that can enter a home. Indoor wood furnaces, if not properly ventilated, can cause poisoning and asphyxiation.
Outdoor wood furnaces typically rely on incomplete combustion, which creates a number of potentially dangerous by-products. The gases generated can seep through windows, as can the particulate matter in their smoke. While acute poisoning is unlikely, particulate matter can cause a number of respiratory-related health problems, which has led some governments to implement bans on new installations. Outdoor wood-burning furnaces must typically be placed a significant distance from homes to mitigate these risks. Embers that are not caught by these furnaces can also cause fires.
Indoor wood-burning furnaces use far more efficient combustion processes that produce fewer dangerous by-products, making them safer, by some measures, that their typical outdoor counterparts. However, their indoor placement also means that small amounts of dangerous by-products can cause substantial harm or even death. Without proper ventilation, the smoke generated can spread throughout a home, and problems leading to inefficient combustion can vent hard-to-detect carbon monoxide, a dangerous chemical. Detection systems provide some protection. As with all indoor furnaces, the risk of fire is always present, although systems have safeguards to mitigate this likelihood.