X11 forwarding from Amazon EC2 AMI

   local$> echo $DISPLAY
   :0.0
   local$> ssh -X -i PEMFILE ec2-user@AMAZONEC2_AMI
   [ec2-user@REMOTE_AMI ~]$ echo $DISPLAY

   [ec2-user@REMOTE_AMI ~]$ sudo grep X11 /etc/ssh/sshd_config ~/.ssh/*
   /etc/ssh/sshd_config:#X11Forwarding no
   /etc/ssh/sshd_config:X11Forwarding yes
   /etc/ssh/sshd_config:#X11DisplayOffset 10
   /etc/ssh/sshd_config:#X11UseLocalhost yes

Hence the display is not forwarded. a command like emacs & for instance does not show the X11 window on the local desktop.
Please advise.