Around 80% of global trade volumes are transported by ships. The shipping sector is responsible for approximately 2.89% of anthropogenic greenhouse gas emissions due to its prevailing dependency on fossil fuels. However, the tightening of environmental regulations urges shipping to shift to fossil-free energy sources, such as biofuels and synthetic fuels. In this paper, we analyze the sustainability of methanol, produced either from natural gas or biomass, and liquefied biogas. For this, we utilize a sustainability index combining environmental and economic indices. The environmental index demonstrates the environmental harms from emissions derived from producing and consuming the fuels. The economic index includes the fuels’ life-cycle costs. Our results reveal that biofuels’ environmental sustainability depends on how CO2 emissions are calculated during their life cycle. Burning biofuels produces CO2 emissions, but the emissions from biofuel production depend on the biomass source. Environmental regulations are not unanimous about treating CO2 emissions from biofuels: In the EU Emissions Trading System, if the biomass is from sustainable sources, CO2 emissions from biofuel consumption are considered zero, in contrast to IMO regulation. Moreover, the economic index is highly influenced by fuel prices, which are difficult to predict. With alternative fuels, the life-cycle perspective is especially important since emissions from production dominate more than with fossil fuels. Therefore, the importance of the holistic analysis of shipping fuels, which we conducted here, will increase.