It wrecks legal stability and crushes investment.
Sofia Ranchordás 14, a full professor of public law and a Rosalind Franklin fellow at the Faculty of Law of the University of Groningen and she is also an affiliated fellow of the Information Society Project at Yale Law School, 2-11-2014; Statute Law Review, "Sunset Clauses and Experimental Regulations: Blessing or Curse for Legal Certainty?," https://academic.oup.com/slr/article/36/1/28/1614369 //AS
Max Weber claimed that legal certainty is one of the pillars of capitalism since without sufficient legal stability and predictability, investment may be significantly discouraged.94 To wit, investors may not invest in new technologies, for example, if they fear sudden and disadvantageous legislative changes. According to this perspective, a capitalist system presupposes a sound degree of legislative certainty since uncertain rules, on the one hand, do not allow private actors to predict their rights and duties and, on the other, may grant unconstrained discretion to official decision makers.95 More recently, the EU Mandelkern Group on Better Regulation expressed similar concerns regarding a broad enactment of sunset clauses. Although this legislative instrument could be advantageous in a number of situations, it was equally acknowledged that sunset clauses could have a negative impact on the investment climate. If regulations designed to incentivize substantial investment in a determined technology expire within a beforehand known period of time, private actors may be more reluctant to respond to these incentives. This will be particularly true if the sunset period is shorter than the time span required for recovering the investment made. In addition, individuals might experience distrust in the protection granted by law and feel that the regulations imposing or stimulating them to invest in a new technology are not providing them with sufficient legal certainty upon which they can ground their investment decisions.96
The potential negative impact of sunset clauses on investments may particularly occur when legislators set fixed periods that disregard the development cycles of the regulated sector.97 An example comes from the United States: here a sunset provision was included in the regulations on the production tax credits which were deemed to fuel investment in renewable energy and advance clean energy innovation. Although the sunset provisions imposed on these tax credits could be renewed for a period of one to three years, this renewal appeared to be insufficient since at least three to seven years are required for the development of a wind farm. Under such circumstances, the uncertainty regarding the possible renewal of the tax credit slowed down long-term investment.98.