Common methods of determining atomic polarizabilities suffer from the inclusion of nonlocal effects such as charge polarization. A new method is described for determining fully ab initio atomic polarizabilities based on calculating the response of atomic multipoles to the local electrostatic potential. The localized atomic polarizabilities are then used to calculate induction energies that are compared to ab initio induction energies to test their usefulness in practical applications. These polarizabilities are shown to be an improvement over the corresponding molecular polarizabilities, in terms of both absolute accuracy and the convergence of the multipolar induction series. The transferability of localized polarizabilities for the alkane series is also discussed.