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How does an insulated liner help reduce creosote and moisture?

When you burn wood, the moisture in the wood (there is always a certain percentage) mixes with the creosote that is formed from burning wood and rises in the chimney as a gas (smoke). When the smoke hits a relatively cool chimney, the creosote and moisture turn back into a solid/liquid. The cooler the chimney, the more the creosote adheres to it; the warmer the chimney, the less creosote will adhere to it.

Simpler terms: it is much like an un-insulated window in your house. Single pane windows are always wet with moisture in the house in the winter time because they are cold. No matter how warm you keep the house heated inside, the moisture is still there. However if you install an insulated double-pane window you will eliminate the moisture on the windows. If you touch the insulated glass, it still feels cool compared to the indoor temperature, but it is warmed enough not to allow condensation. An insulated chimney works in the same manner, where as it is not as warm/hot as the fire, but warm enough to significantly reduce the moisture and creosote mixture from adhering to your liner.