The Formox process is a well‐known process for formalin generation, which uses iron‐molybdenum oxide as a catalyst. Typically, the off‐gas from the formaldehyde absorption column in Formox process is burnt in the emission control system (ECS), resulting to produce a huge amount of CO2. This work proposes a modified process to remove formaldehyde and volatile organic compounds from the stack of formaldehyde absorbing tower. Steam reforming reactions in a novel fixed‐bed tubular membrane reactor is used instead of combustion reactions in a conventional fixed‐bed reactor in ECS. The process was modeled to evaluate the role of membrane reactor for CO2 mitigation in Formox process. The collected data from a domestic formalin plant were used for modeling purposes. The model was validated against experimental measurements obtained from other works. A good consistency was observed. The improvement in CO2 emission mitigation, as well as H2 production, was achieved by applying the Pd‐Ag membrane reactor filled with copper‐based catalyst. The CO2 emission rate considerably changed from 6,700 to 575 kg/day. Furthermore, by using the proposed reactor, the emission of formaldehyde and methanol vapors throughout the ECS plant were eliminated. The essential parameters such as reactor pressure, temperature, and membrane thickness on reactor performance were evaluated. By increasing the feed temperature, the carbon dioxide production rate decreases, and pure hydrogen production rate increases. The higher CO2 generation was observed at elevated pressures. The effect of membrane thickness on CO2 emission was negligible.