Policy does not allow granting permissions at this level to one or more of the recipient(s).  Please select another permission level and send the sharing invite again.

This occurred for us after changing a user's on-prem AD account, in and Azure Synced environment.

On the computer trying to share the Calendar - download nk2edit.

Go through and delete any entries for the person they are trying to send to.

Save the file.

Re-open outlook and retry.