Problem with gem during deployment, missing RedCloth?

I’m deploying a rails app via capistrano that requires only one gem, RedCloth. RedCloth is listed in gem list, but when I deploy with

config.gem ‘RedCloth’ and
require ‘RedCloth’

in environment.rb, I get the following error when I run

cap deploy:migrations

Error message:
Missing these required gems:

Full disclosure: this is my first rails app deployment. However, it seems that if the gem is installed on Dreamhost, then this should work fine with no need to go through installing custom gems on DH.

Thanks for any help you can offer!