Kat, peat pots do just the same as cow pots, and are much, much less expensive. I don't know anything about the environmental impact of the production of peat pots. You would do just as well to use egg cartons, yoghurt containers, waxed milk cartons, or several layers of newspaper* folded into container shapes -in other words, recycle stuff that you have anyway and would either be throwing in the trash or into the recycle bin (if recycling is available in your area). Other than the newspaper*, which you can plant in the ground like you do with peat pots, the other containers can go into the recycle or trash bin after they have done their duty as seed-starting pots.

* Not sure about the composition of inks in newspaper anymore. Used to be concerns about heavy metals in the ink when used as grow pots or mulch. I might use newspaper pots to start non-edible plants in, but don't think I would use them for food crops, or plant the pot in the soil without doing some more research.