If you are using Optimize Storage with iCloud Photos, then you are depending on iCloud Photos to hold on to most of your original pictures files so they don't have to reside on your Mac. You can't edit pictures if their originals are not local.
If you want to be able to edit pictures away from the internet, then you need those original files to be local. If you don't have room for them on your Mac's internal drive, then you can use an external drive. For a MacAir, which people usually get for portability, an external hard drive dangling off the machine is pretty awkward. And plugging and unplugging the iCloud-connected Photos Library from the computer may cause problems.
Here's an idea: create a new empty Photos Library on your Mac, maybe on an external drive, and don't connect it to iCloud. Use File>Import to import the pictures you think you want to work on from your iCloud Library to this new one. When you import them, Photos will download the originals from iCloud for the new Library. Since you're just getting the few pictures you will want to edit, you should be able to fit those few on your drive-- if not, having an external Library will be for a limited purpose. After you edit them, you will need to delete the unedited ones from your iCloud Library so you won't have to deal with duplicates when you import the edited ones back.
Here's what I do: I keep all my pictures in an archive Library, not connected to iCloud, that can be on an external drive, and I edit my pictures there. Then, when I've decided which few are my favorites, I transfer them to a small Library on my internal drive that's connected to iCloud. Those are the ones I want to share, and the Library of Favorites is small enough to fit, and I don't have to Optimize, though I could optimize this Library if it were necessary.
Long ago, I decided to keep my iCloud-connected Library on my internal drive, and keep everything else that I could on an external drive.
In all of this, be very careful about your storage space on the MacAir. The free storage should not get below 10% of the total.
You should have your full Library, external or internal, available for backup. As long as your Photos Library is Optimized, you can't back it up. Very dangerous!
What do you think?