"The horse PAWED at the sky."
Now, I don't think pawed is used appropriately here.
What word can go in its place?
I'm looking for something that can help the reader visualize a horse rearing onto its back legs with its two front legs in the air.
Any ideas for what word I can use in this instance?
Consider the slightly metaphorical struck at the sky.
We seem to hesitate at reared, perhaps because it focuses on the wrong legs. Pawed troubles some because horses don't have paws, but hooves. Hoofed the sky sounds silly, because it's a verb only in a colloquial sense, meaning something else entirely.
When a horse gets up on its hind legs and takes a whack at you, you're being struck by the horse. If you fall to the ground, you may be trampled, but that's another bale of hay entirely.
In defense of strike / struck here's a passage of immortal Wikipedia prose on the subject of "Rearing_horse"
A horse that rears when being handled by a human who is on the ground also presents a hazard, as it is able to strike out with its front feet and can also fall even without the weight of a rider to unbalance the animal. A rearing horse can also break away and escape from a human handler.
However, rearing also has survival value in the wild. It is a tactic that can be used to dislodge a predator that has landed on the animal's back, it is used when equids fight one another, and a horse can rear slightly to add force when striking out with its front feet. For these reasons, horses, particularly young ones, are sometimes seen rearing when loose in a pasture, particularly when playing or mock-fighting with pasturemates.
Rather more than you wanted to know, eh?
Rear is defined as "(of a horse or other animal) raise itself up on its hind legs" (here).
