cannot load such file -- bundler/setup (LoadError)

I had almost precisely the same error, and was able to completely fix it simply by running:

gem install bundler

It's possible your bundler installation is corrupt or missing - that's what happened in my case. Note that if the above fails you can try:

sudo gem install bundler

...but generally you can do it without sudo.

It could be that there was a previous Ruby env installed on your system prior to your installation of 2.0? This might have had an existing GEM_PATH that lead to the /1.8 directory which the installation of version 2.0 simply kept.

The problem you where likely having, then, was that Passenger/Apache was looking in the /2.0 directory when in fact the gems were in the /1.8 directory. Your explicitly telling apache to use the /1.8 directory thus makes sense to fix the problem.

SetEnv GEM_HOME /usr/lib/ruby/gems/1.8

You might also try using the Ruby Version Manager to handle multiple Ruby envs.

Some things I found in Google:

• New to Ruby and am having trouble with LOAD_PATH
• http://weblog.rubyonrails.org/2009/9/1/gem-packaging-best-practices/
• http://guides.rubygems.org/faqs/

You most likely have more than one Ruby installed.

If you are using RVM, you probably need to run:

rvm use system

to set the version of ruby to use.

See http://rvm.io/rubies/default

ruby -v

will tell you the version you are currently using.

You can try to run:

bundle exec rake rails:update:bin

As @Dinesh mentioned in Rails 5:

rails app:update:bin