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Although peat pots sound like a great solution and they do utilize used plastic with peat comes other very serious problems.

"Gardeners are familiar with peat, compressed into cake-like pellets for starting seeds indoors or used in bulk as a soil enricher, compost component, or an ingredient in planting mix. But peat harvesting is an industrial-scale mining operation that is rapidly turning ancient peat bogs into one of the planet's most endangered wildlife habitats."

http://www.treehugger.com/files/2007/09/for_peats_sake.php

If you want something you can pot in and then transplant just make newspaper pots.

I'm not thrilled with them, either, because of the peat and because they're kind of a pain if you're not going to plant immediately because they'll root straight out the bottom. You're supposed to tear the bottom half of the pot away before planting, which I'm incapable of doing without tearing at the root ball.

In any case, I reuse the plastic pots that come with nursery plants, and what I don't use myself there's always someone who wants them.

Just echoing that peat is most definitely not a green choice, and there are so many other options. Newspaper, as mentioned above. Coir, a coconut product, also biodegradable., although not necessarily local The possibilities for seed starting containers are endless: old yogourt containers, milk cartons cut in half, milk bags, old fast food or delivery cartons etc...

Peat mulch can be replaced with compost, leaf mold, shredded tree clippings, cocoa, manure...