Although methane-diesel dual fuel implementation is a very effective method in reducing high NOx and smoke emissions, which are the main problems of diesel engines, this implementation still suffers from high level of HC and CO emissions at low-medium load conditions. Considering this problem of dual-fuel engines, it is very important to examine the effects of pollutant emissions resulting from combustion on the environment and human health to see the usability of methane gas in dual fuel mode, and the current literature is quite limited. Therefore, in this study, the effect of methane energy fraction on combustion, emissions and environmental-economic costs was investigated in a dual fuel engine with optimum diesel injection timing. The tests were conducted in a single-cylinder, air-cooled, common rail diesel engine at constant engine speed and variable engine loads. The operation was carried out in two different modes as diesel and methane-diesel dual fuel. In the first mode, the optimum diesel injection timing of common rail diesel engine was determined. Five different injection timings from 11°CA to 19°CA before top dead center (bTDC) were used to determine the optimum diesel injection timing. The second mode was carried out at varying methane energy fraction (MEF) levels with %0, %25, and %50 contributions to the total fuel energy of methane. In the optimum injection timing experiments, the lowest ignition delay period, combustion duration, lower emission values, and better engine performance were obtained with 11°CA bTDC under all load conditions. The methane energy fraction significantly reduced the maximum combustion pressure, especially under low load conditions. However, combustion pressure values of diesel and methane-diesel dual fuel studies under high load conditions were obtained close to each other due to late injection timing, high injection pressure, and higher combustion temperature. Moreover, COVIMEP values of all test fuels were obtained below 5% under medium and high load conditions. On the other hand, NO and smoke emissions, which are the main problems of diesel engines, decreased significantly. With the increase of MEF level in methane-diesel dual fuel application, NO emissions showed an improvement up to 67%. Similarly, smoke emissions improved up to 82%. Despite the high HC and CO emissions, which is one of the main problems of the dual fuel mode, the significant reduction of NO emissions due to methane addition has significantly improved the environmental and economic costs. This situation clearly demonstrated the usability of high methane substitution in terms of emissions in dual fuel mode. In addition, exhaust energy loss for all load conditions in methane-diesel dual fuel mode showed an average improvement of 13.5% compared to diesel mode. As a result, high methane substitution is promising because it significantly reduces NO and smoke emissions, which are the main problems of diesel engines, and the low-performance data is at a compensable level.