Transition to low emission transportation and cleaner cities requires a broad introduction of low- and zero-carbon alternatives to conventional petrol- and diesel-powered vehicles. New-generation gas buses are a cost-effective way to reduce local air pollutants from urban transportation. Moreover, major greenhouse gas (GHG) savings may be achieved using biogas as the power source. The main objective of this research was to investigate CH4 and other gaseous emissions of a biogas-fueled urban bus equipped with a three-way catalyst (TWC) in real-world conditions. The study focused on emissions from a six-year-old gas-powered city bus, supplementing emission data from aging bus fleets. Impaired CH4 oxidation and NOx reduction were observed in the catalyst after its service life of 375,000 km–400,000 km. The main reason for low CH4 and NOx conversion over the TWC was concluded to be the partial deactivation of the catalyst. Another critical issue was the fluctuating air-to-fuel ratio. The results show that the efficiency of exhaust after-treatment systems should be closely monitored over time, as they are exposed to various aging processes under transient driving conditions, leading to increased real-world emissions. However, the well-to-wheels (WTW) analysis showed that an 80% GHG emission benefit could be achieved by switching from diesel to biomethane, giving a strong environmental argument for biogas use.